the Air Vent

Because the world needs another opinion

Cognitive Dissonance and a Sustainable Future

Posted by Jeff Id on August 18, 2011

I believe we are seeing some frightening signs from the economy again. I’m very concerned with what we will see in the coming weeks.  Our industry is a sensitive indicator of the economy and oft times we have data well before the papers report it.  If the trends of the past two weeks continue, you had better be ready for very bad news.  I hope to be wrong.

So when I read Bart Verheggens latest anti-capitalist post, it left a dry taste in my mouth.   It revolves around a couple of comments from people who are described as insightful.  I describe them as naive and leftist but since they hold the values of the people in charge of the world these days, and it is their belief structure driving business into the ground, they deserve critique for their public commentary which I’m more than happy to provide.   Here are a couple of quotes and some comments which belong here rather than at Bart’s thread.

In a comment over at CaS he [Andrew Adams] said it in a bit more sarcastic way:

Hmm, I can never remember whether AGW is a huge plot to enrich developing countries by redistributing the wealth of us in the West, or a huge plot to impoverish developing countries by denying them access to affordable electricity.

Neither of these is the case in his sarcastic comment of course. First, giving to poor people electricity or goods, makes them dependent on uncontrollable politicians, and will do nothing to ‘enrich’ them.  Free stuff is nice, but it means that people won’t work very hard to become non-poor and pay for stuff and when the politician decides not to pay the subsidy anymore, what then?  Why would they work hard if stuff is free and there is no personal gain? How many times do we have to re-live this obvious fact in history before the left notices.  The second sentence is just silly, impoverish by denying affordable electricity. Oddly enough, if he had said impoverish the poor by denying industrial countries affordable electricity, I would be in agreement. But what the hell is a developing country?? What is it?

I’ll tell you what it is, it is a country impoverished due to dysfunctional corrupt and universally LIBERAL governments which control every aspect of the populations life with randomness of corrupt permission and denial. Property ownership is not a function many of these governments hold stable, and medieval religious orders often hold overwhelming power and rule with iron fists. Business is completely unstable in these countries so they are poor, they will remain poor until capitalism and property ownership stabilize and nothing we do in the West can save them from being poor. It is entirely their own fault. Yes there are bad things done by more functional countries, but NO we are not the cause of the typical ‘developing’ countries poverty.  More poverty will certainly be the effect of ‘renewable’ energy, but like so many other policies, this poverty is forced  on them with the best of intentions.

Where Bart’s post completely leaves the rails though is here:  I added my comments in red.

The ethical issues that are behind this were summed up by Steve Easterbrook:

To many people, living comfortable middle class lives inNorth America, climate change is some vague distant threat that will mainly affect the poor in other parts of the world. So it’s easy to dismiss, no matter how agitated the scientists get. If you follow this line of thinking, it quickly becomes clear why responses to climate change divide cleanly along political lines:

To many people in North America, now at over 10 percent real unemployment, who can think for themselves understand that climate change extremism has been created by a political ideology bent on the repression of capitalism in favor of wealth redistribution.  A solution which has failed in every application ever devised across the globe. They need to realize that without definable effects, they are just screaming fire in a theater.  After enough false alarms, nobody listens anymore.  Leftism is the answer to nothing, and the focus on leftist solutions to the problem certainly does dilute the message of the problem.  Regularly exaggerated scientific papers don’t help the Air Vent’s readers buy the solutions much either.

If you care a lot about fairness and equity, climate change is an urgent, massive problem, because millions (maybe even billions) of poor people will suffer, die, or become refugees as the climate changes.

Fairness and equity, the siren call of the communist. A beautiful idea gone wrong.  How about this: If you care about the economy, it is an urgent, massive problem, because billions of people will suffer, die or become refugees, not in a hundred years but NOW.  As the economy is dismantled under liberal pressures, including regulations to stop the emissions of CO2, the devastation will make AGW horror stories look miniscule.  You know the same AGW which has created not one single demonstrable problem to date. 

Liberals, especially the climate extremist variety, completely ignore the impact on the poor of shutting down an economy.  We are getting darned close to witnessing economic disaster, and the liberal press will spin away blaming capitalism and conservatism as the root cause, when in fact it was corruption, liberal redistribution and in-affordable payoffs to politically friendly groups which has created the untenable business situation in the globe.

On the other hand, if you’re comfortable with a world in which there are massive inequalities, where some people live rich lavish lifestyles while others starve to death, then climate change is a minor distraction. After all, famines in undeveloped countries are really nothing new, and we in the west are rich enough to adapt (Or are we?).

Slow witted people just piss me off, especially if you can’t tell if they are simply lying.  The wealth of the capitalism-created modern technology has supported more populations and reduced more famine than any liberal country ever will.  Watch the difference as we descend ever deeper into the socialist trenches of operation.  I can promise you, that the evil capitalist who ‘wants inequality’ will have provided far more opportunity for the poor than the coming inadequate wealth redistributions.  

The dominant political ideology in the west (certainly in the English-speaking countries) is that such inequality is not just acceptable, but necessary. So it’s hardly surprising that right wing politicians dismiss climate change as irrelevant. No amount of science education will change the mind of people who believe, fundamentally, that they have no obligation to people who are less fortunate than themselves. As long as they believe that they are wealthy enough that climate change won’t affect them, that is.

How unimaginably crude to expect people to compete and battle for success.  It’s not fair to make them work hard.   It isn’t right that people who work differently don’t achieve the same success.  Right wing, the leftist extremists call us.  Competition and do your best are simple principles which can lift any impoverished nation right out of the dirt.   Study China’s special economic zones for examples.  But no, we’re naive, foolish and actually want people to be poor.  America’s massive success proved nothing.  It was a fluke caused by WWII, not the power of free people to create products at will or keep their hard earned profits.

Isn’t is possible that instead of those of us in North America, who were the most successful and clean economy in the world, perhaps had a good idea?  Isn’t it possible that the free market capitalism did work?   It will be a disgusting day when the rest of  the world watches the change to socialism destroy America.  Be sure they will scream from the hills that capitalism doesn’t work and more socialism is the answer to our ills.  I wonder if anyone will remember that we had the largest and most expensive social programs in the world dragging us down.  I wonder if they will remember that we gave so much money to the rest of the world out of our own pockets for the good of humanity.  I wonder if they will remember just how many food drops or which military interventions were useful.  I also wonder if the economy will turn around and the American people will make an attempt to reverse the current corporate situation before it is too late.

Nope, this is about AGW today and this is how Bart concluded his post.

I don’t think that there is something intrinsic to right wing politics to discount problems that your own actions cause to others (I sure hope there isn’t). There are plenty of examples of politically right oriented people making a big stand for e.g. environmental issues (e.g. Winsemius and Nijpels in the Netherlands; Schwarzenegger in the US). It is however disconcerting that the current manifestation of this important political stream does show signs of such discounting/ignoring especially as it relates to human induced climate change.

Now of course anyone who calls Schwarzenegger a conservative, is well off any scale I can imagine. The last sentence though about discounting/ignoring is a reversal of reality, the leftists (and they are leftist) are discounting/ignoring the rational critique of both the science and the universally leftist solutions.  The models are running high relative to observations so the problem is not as severe as advertised.   BUT, if  they are all so damned sure that we must do something, then why is the something always (and I do mean always) industrial suicide.  Why is there no answer which addresses the true core problems of the science.  Even James Hansen the destroyer, criticizes the flatly stupid renewable energy (whatever that is) and he then follows it up with support for increased prices on fossil fuels.  Increased prices for energy translates directly to increased poverty across the globe.  The same thing excoriated by our ‘insightful’ group above. The impoverished leftists in ‘developing countries’ starve.  All the while, the only significant dent in CO2 production we can make today for the “must do something” group is nuclear power, is universally ignored for reasons only those same liberals can understand.

I have little concern or emotion for a group that claims the world is ending so we must destroy our way of life, when a solution that they should be supporting is staring right in their contrite faces.  Go ahead, tell me I don’t understand the complex nuances of the economy.  Tell me whatever makes you so smugly confident that you know best.  Otherwise, perhaps you should be listening to reason.

Yet the capitalists want to hurt the poor they imply.  The capitalists -who created the middle class- are the enemy of equality rather than the inventors.  Capitalists should pay more money to people in primitive countries who have dysfunctional society.  All that does is support the corrupt politicians so that they too chose to become dependent us for expensive energy.

What we need in the US is a return to sensibility. No countries unilateral change can prevent CO2 emission and any significant global repression of CO2, with no allowed working energy alternatives, are a path to mass starvation.   We need elimination of many of the EPA’s powers and regulations.  We need to build working power plants of conventional types. We need to drill for oil and feed our people so that our industry can again lead the world in ‘true’ output. We need to be a global energy and goods exporter.  Only then will technologies which free industry will again develop be able to make a real dent in CO2 production.  New fission reactors, fusion and solar research, better storage research are all key, but implementation of wind and solar is flatly stupid.  In the meantime, we can find out if CO2 is truly as bad as they say, because it sure  doesn’t look like it is a big problem today.

90 Responses to “Cognitive Dissonance and a Sustainable Future”

  1. BPW said

    Amen Jeff. Primarily a lurker, and am fairly moderate politically, but this sums up my feeling on the subject very well. There are far bigger issues to be discussed and fixed before we need to be addressing a possible future problem that may or may not be a problem.

    FWIW, my business–scientific equipment manufacturing and sales (solar is big)–is pretty strong despite the issues with the economy. Research is happening. Just fewer people are working at the companies who do it.

  2. Jeff Id said

    Solar will work well for many applications someday, I’m sure of that. Where I have issues is with the strongly subsidized implementation of solar today.

  3. Steve Fitzpatrick said

    Jeff,

    Wow, you are pretty wound up about Bart’s post. I think it was mostly leftist drivel of course, but that is about what I expect from Bart and most of his regulars. After seeing much the same in many posts, I can’t get too excited.

    WRT your comments about current business climate: I don’t know if it is that bad. Sure, it looks like the Europeans and Japanese are facing some serious problems because they can’t/won’t control excessive public spending, and this may be economically very bad if they don’t make some tough choices very soon. People in Europe have to recognize that the political inclinations and suggestions of folks like Bart are at the heart of their problems. If, that is, they want to get their fiscal houses in order and avoid an economic/political train wreck.

    Here in the States, we still suffer from the economic damage of the broken housing bubble, and from the obvious political deadlock over the same basic question of public expenditures. But most of the rest of the world seems to be doing pretty well economically, with strong growth in many second-tier economies, as well as continuing rapid economic growth in China. My business sells considerably more (2-3 times) outside the States than within, and our products are almost all capital investments for the buyers; capital investments are normally very sensitive to management’s expectations of future profits. We have seen a couple of weak years in the States, but considerable growth outside. Even in the States, there seems to have been some recent loosening of the purse-strings. So I am cautiously optimistic that modestly improved growth will return to the US economy reasonably soon. As real wages increase over the next decade or two in low wage countries that have been taking many of our manufacturing jobs, US manufacturing should become more competitive.

    Some political changes next year would hasten that happening. We do need to keep the enviro-wackos (like the folks currently in charge at the EPA!) off the ship’s bridge as much as possible, since they could easily make economic recovery just about impossible. Indeed, substantial economic contraction and much lower material living standards seem to be among their primary policy objectives. Makes it pretty clear to me who I should vote for.

  4. timetochooseagain said

    The premise-besides that mean old conservatives really don’t care about the Third World (pick your politically correct terminology if the old Cold War era terms make you squirm) so because climate change won’t meaningfully impact them, they don’t care, let the poor suffer, blah blah blah-is that the Third World, because it is presently poor, will be harmed by future climate changes because the poor are vulnerable to them….teeny tiny problem with that logic: by no one’s estimation are the poor countries of the world going to stay that way forever. If you actually look at what is projected to happen, even by the IPCC, the poor nations of the world are better off in the future. Which makes sense, they are growing, emerging economies moving their ways up the ladder rapidly to status on the level of modern First World economies. How rapidly one can’t say for certain, but it will surely be much larger growth than any negative impacts of climate change.

    Back to the other problem. Oh those mean old conservatives like Jeff and…well, okay, I’m not old by I’m pretty mean aren’t I? It is pretty typical that a leftist doesn’t understand how socialism screws over both the rich and the poor by “redistributing”: Witness the sarcastic reference to an apparent contradiction: climate policies are simultaneously claimed to be harmful to poorer people and countries, and also an effort to engage in a scheme redistribute wealth from the rich countries to the poor countries. First, let me just say that this kind of ignores some important subtleties: there are proposed policies which would be aimed primarily at restricting the emissions of Western Economies, while permitting growth of Third World economies. These policies would not have any impact on climate. When one brings up that these policies would have no impact on climate, then a different idea is proposed which lacks the realpolitik of international socialist redistribution: namely, restrict the emissions of the Third World, too! It is these policies which are criticized on the grounds of unconscionably holding back those economies when their people’s standard of living really needs to go up. But make no mistake, redistribution of wealth from the Western Economies to the “poor” countries is not good for either the Western world or those on the receiving end. Making those countries more dependent than they already are on the West impedes their ability to meaningfully advance their economies, forever languishing in a state of dependency without the real drive that brings about the rise to higher status. Moreover, by hurting the Western Economies, you cut into their ability to grow, upon which you have now made growth of the Third World dependent! In other words, by tearing the top down to feed the bottom, you hold them all back.

    Let’s be real here. By allowing both the Western Economies and the Third World economies to prosper, us mean old conservatives are ones who care about, not just the poor, but everyone. By pretentiously seeking to care disproportionately about the poor, Leftists and Climate Extremists allied with them want to bring about a result that is bad for everyone, rich and poor alike. Maybe, maybe they will succeed in hurting the poor less than they do the rich. But I would hardly call that anything to be proud of.

  5. RB said

    I agree that things could get dramatically worse. The high energy costs no doubt have played a big role so far to compound the underlying weakness – this is probably going to be the story over the next decade as energy costs cause shorter business cycles. According to energy analysts, they get a lot better reception to their “peak cheap oil” theories in Texas from the oil producers than from the politically minded. I’d say, given the employment prognosis now, Obama’s chances are not looking very good.

  6. Frank K. said

    This simply confirms that the entire “global warming” movement has nothing to do with science and everything to do with radical left-wing ideology…

  7. Rick Bradford said

    I strongly recommend this blog post by Martin Durkin

    http://www.martindurkin.com/blogs/real-global-warming-consensus-or-why-intellectuals-hate-capitalism

  8. Jeff Id said

    Steve,

    I’m not wound up at all just concerned when the world considers these people as reasonable. It is easy to hate a system which was successful, just as it is easy to imagine a system which pulls a payment lever for every problem as it comes up. When the leftist radicals ignore what it takes to run a business and excoriate what capitalism has done for the world replacing the truth with ‘greedy business’, it is worth letting them know they are making fools of themselves.

    There are so many flatly false claims in one post that it was hard not to let them know.

    Why don’t people understand that government legislates in their own best interest —always. This is why the US system attempted a small weak central government from the start. Empowering it and trusting it to do what you want because there may be enough people to fire a politician is a near zero feedback approach. These insigtful people are absolutely certain that shutting off the energy is the method to save people, they would need a license to be more wrong.

  9. Bart said

    Some serious Bart-bashing going on over here! You guys crack me up. Leftist drivel? I’m the heart of the problem? Get real.

    The comments that I highlighted described the different ethical ways one can look at the climate issue. Calling that anti-capitalist or leftist drivel says a helluva lot more about the one doing the calling than about me.

    Jeff, you have come out in the past as thinking that climate change science is just a communist plot aimed at wealth redistribution and that poor people bing poor (incuding the bulk of the southern hemisphere) is a problem of their own making. You are thus a propotypical example of the first charicature that Andrew so aptly described.

    Have you checked out Scott Denning ppt at Heartland already? Link and description here: http://ourchangingclimate.wordpress.com/2011/08/13/scott-denning-smashing-presentation-heartland-climate-conference-iccc6/

    “If free-market advocates shirk their responsibility, others will dictate policy.”

    Will you step up to the plate at some point?

  10. Jeff Id said

    Rick,

    Thanks for the link. I enjoyed it.

  11. Jeff Id said

    Bart,

    You don’t recognize what you are supporting. If there are no working replacements for the energy you would take from society, then you leave it with nothing. Your solution is far more dangerous than your problem, therefore your insightful group are in fact quite blind.

    My guess is that if we continue to expand the costs of fossil fuel production, the result will be far more CO2 emission than if we make it cheap while looking for an alternative that doesn’t offend either the anti-nuclear leftists or the somewhat less powerful gods of Physics.

  12. Bdaabat said

    What this whole episode really shows is that Bart is not a disinterested, serious scientist. He is an advocate, trying to find support for his preconceived ideas. CAGW is just a means to an end.

    Bruce

  13. I’m not discussing energy technologies in my post. I’m discussing the ethical and global economic side of the climate conundrum. You don’t get to dismiss that just because you don’t like windpower or government.

  14. Jeff Id said

    Bart,

    What does this mean –Will you step up to the plate at some point? Perhaps that is where I’m misunderstanding you.

    From my understanding of proposed carbon taxes, green energy and mileage standards, I don’t believe that ‘stepping up to the plate’ is the answer to the problem as posed by the IPCC. I also remain unconvinced that the IPCC has made a reliable case. Therefore, when I read comments like the ones you highlighted, all I see is ignorance and lack of understanding of the global economic trouble we are truly in and the massive impact it could have on everyone, including the poor dictatorial countries of the world.

  15. ul said

    Funny how everybody -left/right – fails to see the elephant in the room when it comes to the economy. The now “dept crisis” is still what it was three years ago. A financial crisis. Where did the government spending go ? Anybody ever heard the word “bailout” . So why are the banks still casinos ?

    And when we talk about the US economy – what about the other elephant, military spending ?

  16. timetochooseagain said

    Denning’s presentation was pretty freakin’ stupid on numerous levels. To refer to low prices of fossil fuels as a “subsidy” immediately tells me he has no idea what a free market is, he has no idea what a subsidy is, he has no idea what he is talking about in general. And again he repeats his endlessly irritating physics lesson because we, after all, must just not get the basic physics, right? No matter how many times it must have been explained to him that the basics aren’t what is at issue, he insists on going back to that, because his aim is to focus the debate on points he can’t be challenged on, to handwave his way through all the uncertainties and pretend to be reasonable and say, “hey, be skeptical of people making blah blah blah claims” well, okay, and when we have verified their claims for ourselves? And when we have verified that the claims of the other side are false? Well hey, apparently “Be skeptical”…of claims you have found to be true, as much as claims found to be false…WTF?

    This is the kind of thing that Bart gushes over, what amount to the ramblings of a moron practicing in sleight of hand tactics.

    And of course, the whole idea that “free market advocates” need to “propose something”…

    http://devoidofnulls.wordpress.com/2009/11/09/wonk-homework/

  17. stan said

    Robert Heinlen — Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded- here and there, now and then- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as “bad luck.”

    Bart, Obama, Ayers, and the rest of the crew around the world are about to give us all a very bad case of bad luck.

  18. RB said

    Stan,
    Between you and Rick#7, i can’t tell if folks are in favor of giving more power to the “few and elite.”

  19. Anonymous said

    #18, No they don’t want to give more power to Obama’s team.

  20. Kenneth Fritsch said

    Jeff ID, I just read the linked comment with which you started the thread. It really has nothing of substance to say and is merely lamenting what those commenting think some generalized Western attitudes of middle class to affluent people might be. It provides nothing in the way of a direction, be it political or economic.

    Why bother replying other than to provide a sounding board for your views? I would much prefer that you give your views as stand-alone comments. I really do not enjoy nor gain any additional information when the named blog author comes here to engage in name calling.

  21. jeff Id said

    #20, Kenneth,

    I think you should read his post with more care. The post is hard left nonsense supporting that we ‘do something now’ against the concept that the ‘evil capitalists’ see poverty as fair when nothing could be farther from the truth. It seemed appropriate to put it here as there is enough detail that it would be difficult to jam in a comment reply. Also, blogs are for the stating of views, I believe my views are reasonable enough to post, so I did.

    Also, it seems that Pat Frank gave up on replying to my last comment. I have a post half written on his paper but decided it wasn’t interesting. I did practice using LaTeX [corrected] though, that was fun.

  22. Anonymous said

    “I did practice using Latex though, that was fun.”

    Dare I ask?? You ARE talking about LaTeX I hope? 8>)

  23. Jeff Id said

    ROTFL, tears!

    LaTeX!!

    Horrible imagery, thanks for that.

  24. Almost two years ago released e-mail messages confirmed our worse suspicions about the AGW story and the environmentalist movement.

    World leaders and leaders of scientific organizations and the news media have closed ranks in defending data manipulation and outright deceit as good government science.

    Frankly I think it is time for citizens worldwide to close ranks with the Australians [1,2] in demanding an end to tyranny and a return of the basic human right for citizens to control their government!

    1. JoNova’s blog:

    http://joannenova.com.au/2011/08/gillard-has-a-problem-convoy-on-the-way-powers-through-north-queensland/

    2. “No Confidence Rally”, The International News Magazine

    http://www.international.to/index.php?option=com_content&view=article&id=2035:gillard-convoy-of-no-confidence-rally

    With kind regards,
    Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

  25. RB said

    #19, yeah, life is a sport. Some call it welfare for the rich .

  26. I must admit that JeffID and company score. Or should I say that the leftist have just committed another own goal. THey are differnt from classical liberlas, BTW. The best synopsis is from TtCA: If you actually look at what is projected to happen, even by the IPCC, the poor nations of the world are better off in the future. Which makes sense, they are growing, emerging economies moving their ways up the ladder rapidly to status on the level of modern First World economies.” The point is clear it it will not reduce carbon emissions when one looks at what India’s and China’s government’s have publicly stated. SO why is it not just a power grab?

    The first part that Bart and company refuse to recognize is that they are not proposing a moral or ethical solution. They are proposing a rationalizing ethical structure. The structure’s weakness is that the proposal is to take from those who invested in their governments, in themselves, in education, in reasearch, and in education to give to those who did not. The problem as JeffID points out is that such investments are societial values, and investments which fail as gifts. The real fault in what they state is the failure to understand that stealing and murder are both immoral and unethical. Further, they have to blame capitalism for theft and murder, but that their proposal is somehow more moral than the theft and murder proposed for capitalists. Unfortunately for them, the basic work on ecology with respect to man has not changed. Man controls his environment by use of energy. Remove that energy and the numbers of man, the health of man, the food of man, the ability of man to control his environment disappears. JeffID is correct the few numbers of our species that will die unless AGW is much much worse than what the IPCC state, which is presently about twice what is being expierenced, pales compared to the vast larger numbers that will die without affordable energy if the proposed emission reductions actually occur. This is 1950 knowledge. I guess the statists quit theorizing before that time.

    The second part that they miss is actually considering how capitalists would wish to use the poor. They would like them to work, make money, and buy things such that they would profit from their work, they would like to make a profit from what they buy. This is why capitalism is dynamic and can grow exponentially with the right conditions. But they would consume. Of course, this has occurred best in a classical liberal society that values all members of the society, but does not shield them from competition, or self fullfillment.

    This brings us to the third failure. If you actually examine what is proposed, unless their claim of owing other peoples and securing resources for future generations is false, in which case, it is nothing more than wealth distribution according to their political and religous beliefs, not actual moral and ethical considerations; or else, one need only to state that we “owe” an infinite number of generations, and unless we reduce humans to a few thousands, we will not meet this ethical obligation of securing resources for future generations. They are proposing, for a securing of resources, genocide on a scale beyond any we have seen, but are morally correct, because they refuse to acknowledge what their proposals actually mean. This is not a moral or ethical position, but a literal head in sand moralizing of vast proportion.

    The final failure is not to realize that man as a species is competitive. Their structure forces all the competition to be in the political and moral fields. Humans have a vast expierence of governments where the political and the moral authorities have had such absolute control. They are the ones capable, and history has shown most likely, to perform the genocide necessary to reduce man to those few thousands. As long as they are in that group. Not ethics or morals, just raw greedy, self serving power.

  27. Jeff Id said

    Wow John, I might actually be a classic liberal – no sarcasm whatsoever. Were I as well written as you, those who give me headaches would really have trouble.

  28. steve fitzpatrick said

    The rather odd-but-funny thing is that Bart doesn’t appear to see himself as a leftist. Talk about a disconnect.

  29. Carrick said

    RB:

    #19, yeah, life is a sport. Some call it welfare for the rich .

    Welfare for the rich? It’s the bottom (nearly) one-half that isn’t paying taxes. If somebody is getting welfare, it isn’t the rich.

    The top 1% account for 40% of all income, the bottom 50% for about 3%.

    If we restructure taxes, it needs to be done as a comprehensive package based on sound economic analysis, not yet more piecemeal random hacked-up tax laws pasted on here or there. Also, our current fiscal problems aren’t that revenue has fallen, it’s that spending has skyrocketed.

  30. Jeff Id said

    If they do tax the small and midsized businesses (rich) more, what do people think will happen to jobs? Seriously, I don’t think you need to be a rocket surgeon to figure that out. As Carrick says though, spending has skyrocketed. Giving the government more money is no guarantee that they will control spending, it is a feedback which guarantees they won’t.

  31. Kenneth Fritsch said

    “#19, yeah, life is a sport. Some call it welfare for the rich .”

    RB, I think you give away your political stance with the implication that not taxing individuals is a form of welfare. Using the Federal income tax as a marker here I would guess that we would consider that the 50% of the US eligible population that does not pay income taxes are on welfare.

    The glaring and very simple basis for this thinking would have to assume that the state “owns” your entire income and allows you to keep some of it at the states discretion. Kind of like that “nice” slave owner who might allow his slaves to keep some of what they produced.

  32. Kenneth Fritsch said

    “I think you should read his post with more care. The post is hard left nonsense supporting that we ‘do something now’ against the concept that the ‘evil capitalists’ see poverty as fair when nothing could be farther from the truth. It seemed appropriate to put it here as there is enough detail that it would be difficult to jam in a comment reply. Also, blogs are for the stating of views, I believe my views are reasonable enough to post, so I did.”

    Jeff, I am not a blog owner and thus I might well be out of touch with what brings interest and attention to a blog thread. It just seems to me that when a thread is based on what someone else has written and when it is rather vague what was written, one would do better to put one’s own comments and ideas on a subject down on paper and without reference to an offending piece. Otherwise, it appears to be written defensively. My own blog comments frequently do not get much in the way of reply so perhaps your approach is better at generating interest.

    I think John Pittman above gets to issue of what Bart wrote and what you replied, but gives more credence to what I see as Bart’s merely partisan view of the more affluent. For example, on the other side of the political coin, I do not think that a reasonable discussion can be initiated with a comment implying that Obama and his administration are intentionally trying to downgrade the US economy in order to rebuild it in their own image. Obama has attempted to follow the Keynesian prescription for recession which is very much in tune with the current intelligentsia’s thoughts on the matter. (See, for example, a recent Paul Krugman NYT article suggesting if we could only prepare for an alien space invasion and spend on that operation we would be out of our current economic doldrums in 18 months. I suppose he is too political correct to suggest that going to war within the confines of this planet would provide the initiative and rationalization for lavish government spending that his Keynesian instincts so urgently require.) There is no conspiracy in that and it is as well-intentioned as other political leaders have been in following the same prescriptions over modern times – and before. The point of discussion is better to analyze the Keynesian approach and better alternative ones.

  33. Jeff Id said

    Kenneth,

    I did not find Bart’s post entirely vague, although it did lack numerical specificity but we each have our own opinions. You did bring up an interesting point that I have thought on over the past 3 years. People may not realize it but part of this blog has been an informal experiment. I’ve learned over the years how to attract more readers as well as how to repel them. If I write a post with strong opinions about some point or other, those are often times my least popular. I could have simply written a non-opinion post about Barts which made mention of the conclusions and asked a few questions. This style would attract far more discussion and readers over time. It also would probably be more convincing to the general audience of whatever message I felt like conveying. Judith Curry, Steve, Lucia and Anthony have all done well with variations of this style. As you have seen, that isn’t what I have done with my time. Perhaps I should, but I also don’t have any real motivation or direction for this blog. I’m not really trying to convince people of anything, I just enjoy the puzzles and sometimes let steam off at the world.

    Sure I think climate is interesting but it wouldn’t be nearly so interesting without the political pollution of the science and alleged solutions. I have discussed this issue with Bart several times in the past so it isn’t exactly new but the fact that people don’t understand that we have no solutions to the problem as posed, drives me crazy.

    Do something!! they scream.

    Do what?

    Everything!!

    But there isn’t anything that works!

    Do it anyway.

    It costs a lot of money and people will be hurt.

    They will be hurt if you don’t do it.

    It won’t help so why hurt them?

    We have to do everything.

    It’s crazy, so then Bart stops by and asks me to do my part. My part of what? I need a ‘greener’ company? I need a company which creates less CO2 or saves more? I need to drive less so he’ll be happy? Perhaps instead of lighting, I should focus on implementing solar panels everywhere. None of it works, so I vent on to blogspace at the people telling us to jump. My skin is thick though and your critique doesn’t bother me, I’m just not sure that focusing myself on more readers or quiet discussion is what I should do.

  34. Jeff Id said

    Kenneth, I always read your comments that I run across. Even at other blogs. After enough years of reading blogs, the familiar names jump out at you.

    I miss Bender. What happened to him?

  35. RB said

    Kenneth,
    You got me there. Mine was a very narrow point about “America’s persecuted minority.” But maybe they don’t even make Austrians like they used to.

  36. timetochooseagain said

    I miss vintage Mosher. Whatever happened to him?

    Haha, all in jest I assure you. I just don’t remember him getting into arguments with people so much (witness many MANY threads over at WUWT, and what not). Perhaps he just gets rubbed the wrong way by the more lay crowd there than the statisticians at CA?

    I miss CA’s unthreadeds, and the CA BB. In fact, a lot has changed in terms of comments and discussions in recent years. For one thing I now more often leave comments here than there (partly because Jeff is more tolerant of my more wild musings, partly because we agree very much politically and Jeff is not afraid to discuss politics. At CA this is mostly (wisely to be fair) avoided). I’ve also tried to locate many of my old comments, see how my views have evolved, and revisit old discussions, but CA’s search system now only seems to search contents of main posts. Makes it tricky, sad to say, to find the old stuff I specifically long to find. Oh well.

  37. Kenneth Fritsch said

    RB at 35, now that direct welfare for the rich you reference here is definitely welfare in that the state is redistributing money to that group of people.

    Unfortunately most governments attempt to take in more money in order to dispense it either for political purposes of re-election or for some grand scheme for what they consider the betterment of humankind. The sources for revenues that big government advocates look to are those that are politically the easiest to take from and in the end have nothing to do with fairness. For example, in a democracy it is politically easier to take from the wealthy because they have far fewer votes and not because it is more “fair”. Sin taxes on the poorer parts of the population are instituted for the political ease of imposition and not out of any fairness test. Giving back to some of the anointed wealthy can, of course, build alliances that can be part of a political strategy for financing campaigns or as grander scheme in which the wealthy happen to be a part of it, like, for example, farm subsidies or subsidies that help a heavily unionized activity or those falling under the mantra of too big to fail in order to avoid the supposed impending financial doom.

  38. Carrick said

    Good show, RB. We should pile on the people who are the job-creators because that’s what MSNBC told us to think.

    Ideology and partisanship can make otherwise very smart people extremely stupid.

  39. Carrick said

    Here’s a piece of advise:

    If your financial problems are because your wife is maxing out your credit cards, getting a pay raise won’t help (she’ll just get more credit, and bury you deeper in debt). If your president has thrown away money, the solution isn’t to find more money to throw away, it’s to quit throwing away money.

    Nobody (sensible) is talking about going back to pre-1920 economies (Rick Perry you have to leave the bus now). We just need to go back to pre-TARP days, and stop foolishly assuming the liberal model of economic recovery: First spend a trillion dollars, and then a miracle happens and everybody is better.

    (Especially if those meanie-poo poo head rich people stopped working to get wealthier, and we all earned the same amount of money. Income equality for the win!)

    Do I need a /sarc here?

  40. RB said

    Carrick,
    Thanks for the compliments. I have not in this thread started any debate about the Bush tax cuts or the Keynesian spending of the “fiscal problems” nor do I wish to.

  41. Carrick said

    RB, you’re the one who started the class warfare idiocy. Don’t start the ball rolling if you don’t want to follow it to where it leads.

  42. boballab said

    @37

    Kenneth, you are making the same mistake that RB made about “Carried Interest” and as Megan McArdle did at the Atlantic:

    Yet I did not ask myself a very simple question: why does the carried interest rule exist?

    Of course, it was possible that it was just a loophole written in at the behest of greedy hedge fund managers. But I should not have assumed that it was so, particularly since this does not turn out to be the case. At least as I know understand it, carried interest taxation is a longstanding feature of partnership taxation. And it exists not so that hedge fund managers can afford to buy genuine gold tile to line the floors of their extravagant mansions, but so that partners who come in with less capital can build “sweat equity”.

    http://www.theatlantic.com/business/archive/2011/08/thinking-about-taxes/243651/

    Th proposal that was mentioned in the article that RB linked would not truly hurt the “Rich” but the people with less money, especially if you are dealing with guys like Warren Buffett or George Soros since most of their so called carried interest is nothing more than capital gains from rapid turn over from stock. That money gets taxed at the ordinary tax rates, which for them is 35% if held for less than 1 year. Keep in mind just who is agitating for a change here: Warren Buffet a Hedge Fund manager. Now typically those with a left wing bent will start running around saying “See even the rich agree” without stopping to think exactly why he is doing that. If you do some basic research you see that “carried interest” being taxed at the lower long term capital gains rate of 15% normally doesn’t occur in hedge funds because hedge funds make their money on fast turnover. That means they already pay the higher rate. Now there is a different type of fund called the “Private Equity fund”. These funds make their money on long term investments such as real estate, so since the money made is after the 1 year limit they pay the lower 15% rate.

    Jeremy Naylor says:

    Minor clarifying point – the carried interest tax break benefits private equity fund and real estate fund managers. The “Carried interest” earned by most hedge fund managers are short term capital gains (due to the frequent trading) which are taxed at ordinary income rates. It was really Steven Schwarzmann’s 60th birthday party that brought this issue out of tax professor papers to Congress’s eye (Sander Levin introduced a bill to tax carry as ordinary income in March, 2007, one month after the infamous birthday party – featuring Rod Stewart

    To which Carlo adds:

    Exactly. “Carried Interest” is not the same as the “Performance/Incentive Fees” that a typical hedge fund manager receives. Carried Interest is truly a creature of partnership tax and is typically calculated pursuant to a Distribution Waterfall, which is found in most private equity, venture and real estate funds. Hedge fund Performance Fees are not. And as Jeremy points out, if the Performance Fee is calculated on a short-term gain, it will be taxed as ordinary income. – A Hedge Fund Lawyer

    http://www.theatlantic.com/business/archive/2011/08/thinking-about-taxes/243651/

    Now think about that: The hedge fund manager is agitating for doing away with allowing “carried interest” to be taxed at the long term capital gains rate and only allowing it to be taxed at the short term rate. The hedge fund manager already typically pays the short term rate due to the nature of his fund so it doesn’t really effect him but it drives a knife into the back of the private equity fund manager since that is the person most effected by the change.

    Now why do that? Simple, every dollar that goes into a private equity fund is one less that can go into a hedge fund. Some people make the investment into the private equity fund because they make money and only pay the 15% rate. Now what do you think is going to happen when they get taxed at the higher rate now? You will have good ole George Soros and Warren Buffett going “Since you are going to get hit with that big tax rate anyway, why invest in a long term private equity funds, invest in my Hedge Fund. You pay the same rate but you make your money quicker.”

    That’s right Warren Buffet is not agitating for this change out of the goodness of his heart, it is because he is a greedy bastard that will make money off it. He knows a certain percentage of the private equity fund investors will switch to hedge fund investments and he will get a slice of that. This is not the first time Warren Buffet has pulled this stunt, he has agitated for keeping the death tax high not because it would force his heirs to work (That is why rich people set up foundations for their children to run. See Ford and Rockefeller), but because he can snap up businesses that have to be sold off to pay it.

    Then there is his estate planning business that makes lots of money telling people how to get around the estate tax that he agitated to have increased. Then lets remember this is the guy that invested in Goldman Sachs right before the bailout and he admits the bailout is the reason he invested. Then there is the investment into ADM because of the ethanol subsidies and General Dynamics who basically is in the government contracting business.

    http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/stop-coddling-warren-buffett

    So the next time you hear of guys like Buffett agitating for “higher taxes” start looking to see how it is going to make them richer.

    Also keep in mind that before either type of manager gets paid they have to meet what is called the hurdle rate:

    In corporate finance, Hurdle Rate is the minimum expected return which a planned investment or project must yield in order to be accepted. Therefore, the Hurdle Rate is also referred to as the Minimum Acceptable Rate of Return (MARR). Often, a company’s Hurdle Rate is set at its Weighted Average Cost of Capital (WACC), i.e. the discount rate used in DCF calculations for internal purposes. In the context of Private Equity, Hurdle Rate represents the minimum return a fund must generate before the fund managers can collect incentive fees in the form of Carried Interest. In other words, Hurdle Rate is the fund’s minimum expected return to an investor (who is willing to share with the fund management only the return in excess of the minimum expected return). For example, if the Hurdle Rate of a fund is set at 15% and the actual return is 20% then the management remuneration is composed of the agreed fixed annual Management Fee plus the agreed Carried Interest calculated on 5% (20%-15%).

    http://www.mergers-acquisitions.org/glossary/term/105

    Here is another dirty little secret, the hedge fund manager takes more of the funds profits than the private equity manager. In private equity the percentage is around 20% for hedge funds it gets as high as 50%.

    Also RB’s crack about the Austrian school of economics needs to take a refresher course on them since the central point to them is not making a change without looking at the short term immediate benefit/harm to any one group, but to the whole. A good place to start is here: http://www.fee.org/library/books/economics-in-one-lesson/

    The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

  43. Steve Fitzpatrick said

    Years ago, after I became self employed and started making a bit more money than the average engineer, I happened to travel to the city where one of my sister-in-law’s lived. While I knew that she was a “liberal Democrat”, I figured, what the heck, family is family, so I invited her and her husband to dinner. Since I did not know the area, asked them to choose a restaurant, which turned out to be a very good restaurant.

    We had a nice dinner, with a couple of decent bottles of wine. It all came to well over two hundred dollars, but as I said, family is family. As we were finishing up, I noted that I had just seen a big increase in my Federal taxes due to the Clinton era tax rate increases along with the new “limitations” (AKA take-aways) on deductions and dependents, and said that my net last-dollar Federal tax rate, including the new limitations, wasthen nearly 45%, which seemed to me pretty high.

    With a straight face (and with the desert I was paying for still coating her tongue), she said, “45% isn’t very high; it would only be fair if 100% of all income over $85,000 was confiscated. Nobody deserves to make that much money.” I managed to control a very strong urge to reach across the table and slap her.

    After I calmed down and thought about it, I realized that a) liberals are mostly idiots, b) they have not a clue about what it takes to make money, and c) they can’t/won’t appreciate the contribution of people who actually provide the innovations, insights, and nose-to-the-grindstone effort that ultimately enrich society as a whole. For them, the only thing that matters is that life outcomes be “fair”. (Note Bart’s frequent appeals to the need for what is “fair”.) As far as I am concerned, when someone appeals for “fair” outcomes, it is time to end the conversation. Was it “fair” that Jack Kennedy was born very rich? Was it “fair” that he was shot through the head by an assassin? Appeals to “fairness” are uniformly rubbish. The only “fairness” that matters is that we (society) structure our laws and regulations so that people have the opportunity to excel, and to ensure those people with the required smarts, inclination, and fortitude to truly excel profit from their efforts.

    I never talked with my sister-in-law again about politics, and I have since tried to avoid substantive conversations with all liberals about politics. As is sometimes said in Brazil: If you argue with idiots, you risk becoming one.

  44. Conservatives can be idiots too. There was a reason that George W’s spending was ineffective and set up the Obama give away. It can be determined from here:

    The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

    One has to ask one’s self how did both miss the target. There is an answer. And yes, it is political. Yet it applies to both.

  45. Steve Fitzpatrick said

    John Pittman,

    You will get no argument from me: for sure lots of people who are conservatives are idiots as well (George W and his absurd spending being an obvious example). You need only listen to Sara Palin talk for a few minutes to know that she shares this all-too-common political trait of idiocy. Let’s just say a chess match between George W and Sara woud be a bit of a bore.

    Still, when I listen to to politicians, there are in fact some thoughtful libertarians and conservatives. There are, as far as I can see, very, very few thoughtful liberal politicians; most are indeed idiots…. and liberal politicians are the “cream of the crop”.

  46. Carrick said

    Also, anyone who actually thinks, as RB seemed to suggest, that what Obama and the Democrats did in Washington deserves the title of “Keynesian economics” … well they need to take some economics courses. Keynes acknowledged that government has a role in stabilizing economic cycles, but he called for a limited role of government. Spending yourself an additional 4 trillion in debt is hardly limited by any definition I know (e.g., increasing your total debt load by 50% in an incredibly short period of time). Good thing the liberals can always blame it all on the Tea Party movement (as if they were anything but a response to a reckless fiscal policy, instead of being the actual cause of it).

    That said, John and Steve I agree. I wasn’t just painting supporters of Obama as the only idiots in town, when I said:

    Ideology and partisanship can make otherwise very smart people extremely stupid.

    That comment is true regardless of which ideology or which partisan position a person has chosen to adopt. (Note I’m not implying the converse, not all ideologues are idiots, though it helps.)

  47. Carrick said

    SteveF:

    With a straight face (and with the desert I was paying for still coating her tongue), she said, “45% isn’t very high; it would only be fair if 100% of all income over $85,000 was confiscated. Nobody deserves to make that much money.” I managed to control a very strong urge to reach across the table and slap her.

    Yep the old “income equality” equals (or is a measure of) “social justice”. I wish the people advocating for “social justice” would understand what it actually means beyond the grade school level of “everybody gets a cooke.”

    /sigh

  48. A question for the denizens:

    At what point, if any, is it moral to take a greater percentage from the rich?

    At what point is it not equitable, if any, to take more taxes from those who benefit from the benefits that a stable, protective, LIBERAL society provides?

  49. Steve Fitzpatrick said

    John Pittman,

    At what point, if any, is it moral to take a greater percentage from the rich?

    Morality has nothing to do with it; it is a purely practical issue. At what tax rate do you substantially demotivate creative, productive people from running the risk of innovation? At what point does the moral hazard of most people having no personal “skin in the game”, WRT paying for government, corrupt the political process?

    Warren Buffet is right: high income people ought not pay much lower net rates than lower income people. But neither should they pay radically higher rates. I would be thrilled if income from any/all sources was taxed at a flat rate… no deductions. As a sop to the left, add a modest personal exemption (just political expediency). The key is that almost everyone should have a substantial personal interest in responsible government spending; taxes paid and government provided benefits should be reasonably connected for most everyone. As things stand currently, all discussions of tax rates turn to class warfare…. you pay, I benefit. I can think of nothing more corrosive to the social fabric of a nation than the disconnection of a large fraction of the (voting!) populace from paying for the cost of government provided benefits.

    As Alexis de Tocqueville noted: “Democracy will last until the public realizes it can vote itself money form the public largesse.”. To which I would add the qualifier… if the majority of the public does not itself pay for that largesse. It is the divergence of personal interests between people of different incomes that is destructive of democracy. Confiscation of wealth by the majority, sanctioned under majority controlled law, is still, at the bottom, simple theft.

  50. I personal prefer a head tax to a flat rate, at least philosophically, as it does not aim to treat anyone differently. A flat rate still discriminates based on income, if less severely so than does progressive system. Consumption is not something to punish either. Ideologically I am sufficiently extreme to want to go much further in reforming our tax system than most. I confess to not being tempted by the siren song of revenue neutrality either. A tax system which forces much smaller spending is not something I will shed areas over. I wonder if even our other resident Austrian agrees…

  51. Shed tears not areas, stupid iPod…

  52. Steve Fitzpatrick You say: “Morality has nothing to do with it; it is a purely practical issue.” Thus do bacteria argue. Even crocodile and alligator mothers do better.

    You ask “At what tax rate do you substantially demotivate creative, productive people from running the risk of innovation? ”

    Is this not a red herring that even the crocs and gators recognize? I asked:”At what point, if any, is it moral to take a greater percentage from the rich?

    If you cannot answer the question, I contend that morality has everything to do with ansering this question.

    Goodnight all.

    At what point is it not equitable, if any, to take more taxes from those who benefit from the benefits that a stable, protective, LIBERAL society provides?”

    I did not ask that we, the public vote itself money form(sp =from) the public largesse. I asked at what point do those who benifit from the benefits that a stable, protective, LIBERAL society provides pay more taxes.

  53. Steve Fitzpatrick said

    John Pittman,

    Morality is relative. Morality can be (and is!) used to justify most any public action… including the stoning to death of adulterers (which is still supported by ~80% of Muslims in the Middle East, BTW). If you base an argument on morality, then it is without factual foundation, and may lead to just horrific outcomes. If you base it on practical demonstrable results, it is more defensible.

    Boa noite.

  54. Artifex said

    John

    At what point is it not equitable, if any, to take more taxes from those who benefit from the benefits that a stable, protective, LIBERAL society provides?”

    It is inequitable to take more taxes from anyone (rich or poor) in excess of what they receive in value. In the case of things that are not public goods, determining value is easy. It is what the individual is willing to pay. For public goods, determining what constitutes fair value is the crux of the problem. Do you have a good “objective” way to calculate this John ? If you don’t, it seems to me that the whole problem goes subjective rather quickly.

  55. Brian Hall said

    The morality of the left is premised on the axiom that there is a fixed supply of stuff, and thus the only way the rich got that way must have been by theft. Hence, stealing it back is fair ball.

    Bollocks, of course.

  56. Brian Hall said

    Edit note:
    Jeff —
    Grammarnasty/
    Do bears crap in the woods.
    Is the Pope Catholic?

    Even rhetorical questions get official question marks. You’ve skipped a bunch.
    /Grammarnasty

  57. kim said

    Half the people do all of the work. Isn’t it in the Bible?
    ==============

  58. Steve I agree. The problem with morality is it is not fixed. But I do agree with Artifex as that to take more than one recieves in value is objectionable. Is there a calculable way to determine value in government services, say the military where fit for purpose is a better determinition, IMO, for their value? And in absense of an objective calculable value, still there must be a way to arrive at a proscribed level of taxing. So I would say that it is the absence of an objective calculation that gives those who wish to use a moral compass their legitimate toehold. Otherwise one could, and I would, point out to my representatives that they did not calculate my tax level objectively. In that respect, isn’t Bart and company on a better footing than those of us who oppose it? It would seem to me that our opposition lies in disagreeing with the science and the level of burden of proof to be met more so than opposing it. And of course, judging the effectiveness of proposed programs even more important.

  59. Jeff Id said

    If the discussion is about morality rather than politics, perhaps the taxation levels should be set to maximize revenue for the government such that it could be spent fairly on the people. Unfortunately, the ‘maximum’ includes what businesses can output and is difficult to determine AND bloated government doesn’t even try to spend ‘fairly’. Also, the effect of taxation on business is poorly understood by the popular (and insane) elitist economists of today. Once the human condition is considered, an absolutely minimal central government is a far better solution with low central tax levels.

    People rarely consider what it would be like to have billions to distribute to individuals and corporations as you see fit. The temptation to manipulate and trade favors is quite obviously beyond our power to control. Paygo was a nightmare for all of the above reasons and a ‘balanced budget amendment’ is equally dangerous. If revenues are low- raising taxes as a universal prescription makes no sense at all. There are years of cause and effect of increased business costs. We have seen over the past two decades the results of taxation policy on US business and it isn’t working.

    Raising heavy taxes on fossil fuels does work to repress immediate CO2 output, but it works by the reduction of economic output rather than people choosing a cleaner energy because there ISN’T one. This in turn lowers R&D expenditures slowing or stopping development of low cost alternatives which are so far away, and were it heavy enough to work it would place the majority of the US and European middle class into subsistence living. A dirty condition which likely would destroy wide swaths of various habitats, create wars, starve vast portions of third world countries, and create a large black market for energy. Of course my crystal ball isn’t any better than anyone else’s but when this is the ‘solution’ one wonders why intelligentsia spend so little time discussing this potential outcome. The condition which concerns me most is handled with a handwave in the AR4 reports. That is why Hansen is an idiot. He flatly states there is no possible solution for energy other than an unacceptable nuclear (again by green idiots), followed by ‘do it anyway’. How these multiple flatly false conditions exist in the green argument is beyond my understanding.

  60. RB said

    BobAllab: Buffett doesn’t manage a hedge fund.

    With regards to the point about the existence of a “welfare state for the rich” it sounds like SteveF at least might agree with this statement :
    Billionaire financial engineers—whether they are being called barbarians, LBO dealmakers, or private equity princes—should pay the same rate as the rest of us.

  61. steve fitzpatrick said

    RB,

    There is no welfare state for the rich. Most (but not all) high earners pay a lot in taxes. The top few percent pay the large majority of Federal income taxes. It is the very few extremely rich (like private equity fund managers) who have used undue political influence to avoid paying taxes at the same rate as other relatively high income individuals. WRT the tax structure as a whole: it is a nonsensical system that costs untold billions for compliance, and more often than not, works contrary to the public’s desire for economic growth, by providing incentives for unproductive uses of capital. Long term capital gains ought to be indexed to account for inflation, but the tax rate on that indexed gain should be just the same as regular income. Corporate profits distributed as dividends to individual shareholders ought to be deducted from corporate income; profit retained by the corporation ought to be taxed at the highest individual rate. Deduction of interest on home mortgages should be phased out. The distorting influence of the tax code is everywhere, and does huge economic harm. Unwinding the madness will not be easy and will take some time, but it should be started. If Mr. Obama wants a historical legacy, he could do no better than to work on fixing the Federal tax code.

  62. RB said

    Steve,
    My post #18, was in response to a despised “extremely small minority” for which we have at least one modern analog. Your proposals are a constructive start.

  63. DeWitt Payne said

    Re: steve fitzpatrick (Aug 21 19:09),

    Retained corporate earnings for a non-S corporation shouldn’t be taxed at all. Taxing retained earnings distorts incentives towards debt financing, which isn’t necessarily a good thing. Not to mention the comparative disadvantage to foreign companies with lower, in many countries much lower, corporate tax rates.

  64. Ian said

    Steve Fitzpatrick said
    August 20, 2011 at 11:06 pm

    Warren Buffet is right: high income people ought not pay much lower net rates than lower income people. But neither should they pay radically higher rates.

    I’m naive about the US tax system however the following snippet suggests that Buffet may have recently changed his tune.

    Warren Buffet On Why U.S. Taxes Are Too Low For The Wealthy

  65. Ian said

    Although, on a second viewing, neither he or Gates seems to suggest that high income earners should pay radically more tax that those on lower incomes.

  66. steve fitzpatrick said

    DeWitt #63,

    I must respectfully disagree. If retained corporate profits are never taxed, then that further distorts the incentives, and companies will never pay dividends. Instead they will accumulate capital so that profits from operations become (magically) converted into long term capital gains with much lower tax rates. It is pretty simple: a corporation could holds all profits in a bank account, accumulating cash reserves. Investors (no fools they) look at the balance sheet and bid the share price higher. Net result: shareholders pay no taxes on the accumulated income until they sell shares, and then only at 15%, even though the retained profits have simply accumulated in a near-zero risk bank account.

    The existing (very large) distortions are the DOUBLE taxation of corporate dividends, which is why so many companies are sitting on huge cash hoards instead of distributing profits, combined with the tax advantage of converting after-tax retained earnings from operations into long term capital gains at very favorable rates. Absent double taxation, capital could be allocated to better uses by shareholders via dividend distributions. If all corporate profits are taxed (including what is distributed to shareholders as dividends) then the rate ought to be the highest individual rate, and dividends should be tax free for individuals.. Corporations ought be treated no differently in terms of income taxes than the individuals who own them. Everyone (including the shareholders of corporations) should pay taxes on what they earn.

  67. steve fitzpatrick said

    Ian #65,

    High income people do pay radically higher taxes, but usually at substantially lower marginal rates. Buffet seems to just be saying they should not pay a much lower marginal rate than lower income people. The many distortions (AKA tax incentives) of the US tax code make apples-to-apples comparisons difficult; all the more reason to simplify and remove the distortions.

  68. Kenneth Fritsch said

    “Kenneth, you are making the same mistake that RB made about “Carried Interest” and as Megan McArdle did at the Atlantic”

    Perhaps I did not read the article completely, but my replies were to the idea that reduced tax rates should not be considered welfare unless one is ready to assume that the state owns our entire incomes. There certainly are examples of welfare for the rich that are handed out without consideration of tax rates – for which I gave examples.

    My main point was that we appear to have a mentality that says government must grow and never shrink, and as a result that of that growth, politicians will find the most convenient methods of raising revenue. Until we get over our rather childish view that we obtained in Civics 101 somewhere along the way that there is a fair system of taxation for which our politicians and system strive, the big and bigger government advocate will always have the upper hand. Even those who claim to be for less government get caught up in Civics 101 discussions that have little or nothing to do with the real world.

  69. Carrick said

    JeffID:

    Raising heavy taxes on fossil fuels does work to repress immediate CO2 output, but it works by the reduction of economic output rather than people choosing a cleaner energy because there ISN’T one.

    Even worse, it has no effect on where most of the new CO2 production will come from between now and 2100. That would be China, India and the other developing countries. These developing countries have other needs and problems besides global warming, and need the help of the developed nations to respond to these problems.

    To start with it is a fact that global warming to this point has been relatively benign in its influence on humans: Problems like flooding in Pakistan have more to do with land usage changes, increased population near rivers and a dysfunctional government (that is problems more similar to the laissez faire government of the US prior to the 1927 Greenville flood) than they do to putative changes in precipitation patterns, and the changes in rain fall patterns in southern Australia precede by 40 years any putative effect from AGW (that is, clearly most of the change is from a natural long-term shift in rainfall patterns, the hand of man need not be invoked).

    The problems the developing nations are facing have more to do ironically with other results of the hard work and investment of the industrialized nations, such as an increased prosperity in these developing nations combined with a shift from rural to urban to meet the demand for more non-farm labor as these countries develop in response to increasing world supply for goods. [In another irony, if there is anything the developed nations can be blamed for, it would be European colonization and the “peace to end all peace” when they pulled out of these regions, deliberately leaving unstable nations that would be faced with incessant civil war after their departure. Rwanda/Zimbabwe is a clear exception to that, most of their problems are home grown.]

    Most socialists see it very different, it is “injustice” that the developed nations have a higher prosperity than the developing ones, and we should immediately share our wealth to reduce the income disparity between rich and poor nations (just as they think rich individuals are immoral for being rich within a country, unless they are George Soros or Warren Buffet, then its OK apparently). Draconian response to AGW is just a mechanism for these people to achieve “social justice”, and whether AGW really is a threat or not isn’t that interesting to them.

    Nor apparently are the lives of the people they are supposedly trying to improve with this latest, greatest experiment with socialism. Taxing the rich nations reduces our wealth, and that reduces our ability to respond to the needs of these third world nations that are present now and have no effect whatsoever on the CO2 emissions of the developing nations, which is where most of the future global warming is in fact expected to come from.

  70. Carrick said

    Steve Fitzpatrick:

    High income people do pay radically higher taxes, but usually at substantially lower marginal rates. Buffet seems to just be saying they should not pay a much lower marginal rate than lower income people. The many distortions (AKA tax incentives) of the US tax code make apples-to-apples comparisons difficult; all the more reason to simplify and remove the distortions.

    I know you know this, but this is for the foreigners who don’t necessarily understand the arcane aspects of the US system:

    Proceeds from long term investments in the market have a lower tax rate than income that you directly earn. (In “IRS speak” they are taxed as “capital gains” and appear on Form D, you are taxed for short term gains the same as if it were regular income, long term gains have a maximum taxation rate of 15% last I checked… the purpose of the system is to encourage long-term investment and growth.)

  71. Steve Fitzpatrick said

    Carrick #70,

    For sure it is arcane!

    I think the only legitimacies of the 15% LTCG rate are that 1) it (awkwardly) offsets in part the absurd double taxation of corporate dividends, and 2) it (awkwardly) compensates for the lack of inflation adjustment for truly long term gains. Unfortunately, those things go hand in hand with terrible distortions of economic incentives… like the accumulation of cash by corporations instead of distribution of operating profits via dividends, which would almost certainly mean the capital was, on average, more efficiently applied. For most, the tax system is a nightmare. But for politicians, and those who have substantial influence on them, it is a dream come true.

  72. Mark T said

    And, of course, most of the really wealthy do not have actual income from a salary, which is why they seemingly pay a lower rate.

    Mark

  73. DeWitt Payne said

    Re: steve fitzpatrick (Aug 22 07:57),

    Double taxation is evil.

    But some stockholders want dividends, some don’t. It’s not the proper function of government to force corporations to be tax collectors. How is it a good thing for a corporation to have to distribute all their profits and then borrow money through debt or equity to finance capital investment? Besides, if you index capital gains for inflation, then there is no reason to treat capital gains differently from ordinary income. In which case, investment losses should also be 100% deductible from income, not just from capital gains.

  74. Steve Fitzpatrick said

    Mark T,

    And, of course, most of the really wealthy do not have actual income from a salary, which is why they seemingly pay a lower rate.

    I don’t see how the 15% capital gains rate for ~100% of private equity fund managers’ income is “seemingly” low… it is in fact very low compared to what most everyone else pays.

  75. Steve Fitzpatrick said

    DeWitt # 73,

    Double taxation is evil. But some stockholders want dividends, some don’t. It’s not the proper function of government to force corporations to be tax collectors.

    Sure double taxation is evil! As are estate taxes (which often amounts to triple taxation). But I don’t see that having a rational tax system means forcing corporations to do anything in particular. Yes, some share holders want dividends to spend as disposable income, and some don’t. But even shareholders who do not want to receive dividends could simply buy more shares in the same company with their dividends if they think additional investment in that same company is the best use of capital. If the shareholders disagree with each other and/or with management about dividends versus retained earnings, then they can vote on that question, and change managers if needed. Money talks, BS walks. No matter what investment decisions a corporation makes, they ought not me distorted by tax considerations, as they are today. Operating profits ought to be taxable as income, just as individual income in payment for labor is taxable.

    All I am suggesting is that a) corporate profits should be taxed once (and only once) and b) the rate at which those profits are taxed should be (ideally) at the appropriate individual rate. If the corporation itself pays income taxes on distributed profits, then those distributed profits should be tax-free to the individual. If the corporation does not pay taxes on distributed profits, then the individuals who receive those profits should be taxed at their individual rates.

    What makes absolutely no economic sense is the system as it is.

  76. RB said

    Steve$75: No matter what investment decisions a corporation makes, they ought not me distorted by tax considerations, as they are today.
    Cash payouts can be in the form of share repurchases where it’s not just the tax considerations for shareholders that is a factor. Stock option based executive compensation favors stock repurchases over dividends as a form of payout since the value of options decreases with the payment of dividends.

  77. DeWitt Payne said

    Re: Steve Fitzpatrick (Aug 22 13:30),

    Operating profits ought to be taxable as income, just as individual income in payment for labor is taxable.

    Possibly, but only when they are actually distributed to stockholders. Forced distribution of profits on an annual basis is a bad idea. Making dividends deductible from corporate income while maintaining a high tax rate on corporate income would do exactly that. It would be cheaper to distribute all income and borrow the money and deduct interest as well. But it is even cheaper to not tax retained earnings and not have to borrow at all (or at least borrow less). Do you want jobs created in the private sector or in government?

    A corporation isn’t a citizen. There is no good reason for a corporation to pay taxes on retained earnings at all. Increasing tax revenues is not a good reason. There are lots of reasons why it’s bad.

    Automatic reinvestment of dividend income is done all the time. You could just as easily maintain a constant investment by selling shares when the price goes up. But why complicate life and increase your stockbroker’s income.

  78. Anonymous said

    I don’t see how the 15% capital gains rate for ~100% of private equity fund managers’ income is “seemingly” low… it is in fact very low compared to what most everyone else pays.

    “Seemingly” because it is not as high as the marginal rate would be if it were income. In other words, when they file their taxes they pay very little income tax. The marginal rate paid by Buffet’s secretary is considerably higher simply because most of her “income” is in the form of salary. However, the absolute level of his contribution is extremely high compared to his secretary’s.

    For the record, it is not very low compared to what most everyone else pays. Just low compared to the upper few deciles. The bottom half get most of their taxes back (excluding the so-called “payroll taxes,” which is a rub with me.)

    Mark

  79. Anonymous said

    A corporation isn’t a citizen. There is no good reason for a corporation to pay taxes on retained earnings at all. Increasing tax revenues is not a good reason. There are lots of reasons why it’s bad.

    Yeah, like, it’s just a stealth tax on consumers of the corporation’s products.

    Mark

  80. Mark T said

    Oh, both me. IE9 forgot me again. At least it didn’t swap my name/email like it did a few months ago.

    Mark

  81. DeWitt Payne said

    Re: Steve Fitzpatrick (Aug 22 13:30),

    No matter what investment decisions a corporation makes, they ought not me distorted by tax considerations, as they are today. Operating profits ought to be taxable as income, just as individual income in payment for labor is taxable.

    You do realize that those two sentences are mutually exclusive. Any tax on corporate income will affect investment decisions.

    I don’t see how the 15% capital gains rate for ~100% of private equity fund managers’ income is “seemingly” low… it is in fact very low compared to what most everyone else pays.

    The capital gains rate is 15% because every time they raise it above 15%, revenues go down. Revenues go back up when it is lowered again. This concentration on how a relatively few people with high incomes pay low tax rates is exactly what led to the disaster known as the Alternative Minimum Tax, which is expected to hit 20 million filers before long.

    Besides, the total tax rate for an individual is not their marginal tax rate. It’s very likely that the marginal tax rate for an additional dollar of ordinary income for Warren Buffet is 40%, or whatever is the maximum federal tax rate. In fact, the marginal rate can be even higher than the maximum rate for people with relatively high income but not Warren Buffet level because there are phaseouts that apply.

  82. steve fitzpatrick said

    DeWitt,

    Making dividends deductible from corporate income while maintaining a high tax rate on corporate income would do exactly that.

    Only if the personal rate is significantly lower than the corporate rate. There should be no tax advantage or disadvantage either way; that is the whole point. If corporations are not taxed at all on retained earnings, then there is a huge tax benefit to never distribute income to shareholders. It would creaet a special class of income which is free of taxes… the most wealthy will benefit (who own the majority of all public corporations) by avoiding taxes on accumulating wealth. IMO, all income should be treated equally… a level playing field for everyone. The economic gain from the sweat of ones brow (or their work at a lab bench) ought not be treated any differently from the economic gain from ownership interest in a company… even if it is a very small piece of a company.

    Same thing for IRA’s, 401K’s, and similar incentives…. all distort economic activity. Same for deductions like home mortgages… another economic distortion.

    A corporation isn’t a citizen. There is no good reason for a corporation to pay taxes on retained earnings at all.

    In many places a corporation is in fact formally defined as a “juridicial person” or a “legal person” as opposed to a “physical person” like you and me. In most places, they can in fact be prosecuted for illegal activities, and sued in just about all the same ways a physical person can be via civil proceedings… they are subject to criminal fines, but it is hard to throw a corporation in jail. ;-) I do not suggest that corporations be subject to income tax except for retained earnings, if distributed profits are taxable. I also think it is shear economic madness to double tax distributed corporate profits…. a gross distortion.

  83. steve fitzpatrick said

    DeWitt,

    The capital gains rate is 15% because every time they raise it above 15%, revenues go down. Revenues go back up when it is lowered again. This concentration on how a relatively few people with high incomes pay low tax rates is exactly what led to the disaster known as the Alternative Minimum Tax, which is expected to hit 20 million filers before long.

    Sure, it is all a mess. Investors are careful about taking profits when they face high marginal rates. The AMT is a nightmare, mainly because it throws another layer of complex taxes on top of the already too complex tax structure…. all in the interest of “fairness”. If there were simple (nearly flat) rates and no deductions (ok, maybe a modest personal exemption to calm those on the left), the economy would do better. It is the desire to provide incentives for only certain economic activities and not others that is the problem.

    That, along with the even bigger problem of growth in spending that outstrips growth in economic output. Current Federal expenditures (FY2012) will reach ~26% – 27% of the gross domestic product, while Federal taxes will take in only ~ 18%-19% (the difference is accumulating debt). Add State and local expenditures, and total government spending as a fraction of GDP (~44%) currently approaches that of many European (nominally socialist) countries. Debt financing can’t continue, so the voters are going to have to make some hard choices: cut spending, raise taxes, or some combination. I just hope that any changes reduce the existing economic distortions, not increase them.

  84. BlueIce2HotSea said

    Jeff Id “I miss Bender. What happened to him?”

    I miss Bender, too. Hell, yes. Sometime ago at CA, he said he was planning on working on GCMs and would not be posting as often.

  85. BlueIce2HotSea said

    Kenneth Fritsch #31
    “Kind of like that “nice” slave owner who might allow his slaves to keep some of what they produced.”

    Cotton plantation slaves consumed a dramatically higher percentage of their created wealth than the average modern worker. I quibble over this because the Plantation/Master/Slave model is a good analogy for failed 20th century Marxist States.

    Due to universal impoverishment, both plantation and Marxist States enjoyed a lack of social conflict caused by income disparity. Although the party/plantation masters lived a royal lifestyle relative to the toiling masses.

    Nevertheless, the citizen/slave enjoyed the usual freedoms of social security: freedom from worries over housing, food, clothing, and health care, plus freedom from all burdensome decisions, such as career choice. Turns out that the price of plantation/Marxist freedoms is merely slavery.

    Marxists want Capitalists to step aside because they say their ideology hasn’t really been tried, and won’t be, until the whole world is Marxist. To that I say:

    “Humanity is not complete until it has embraced Marxism. Then it is finished.” BlueIce2HotSea. (h/t to Za Za)

  86. Kenneth Fritsch said

    I guess what gets lost in all these discussions of “fair” and “neutral” taxes that are required to feed the ever increasing size of government is the 800 pound gorilla in the room and that is the deficit spending and unfunded liabilities that politicians find convenient to use when they run out of other ways to conveniently tax the current generations to fund their programs.

    I do need to look at what the current Civics 101 textbooks have to say about the voracious appetite of the state and rationalizations for ways of funding it. In the past, I remember these text books were good at making political strategies for increasing government and funding it sound very legitimate and damn near wonderful.

  87. DeWitt Payne said

    Re: steve fitzpatrick (Aug 22 19:07),

    It would creaet a special class of income which is free of taxes

    That class of (potential) income already exists, it’s called property. And some of it (real estate) is taxed, just not by the federal government. Suppose someone does become wealthy on paper. So what. They can’t spend it on anything without selling assets first. Besides, what’s your problem with someone accumulating wealth?

    The economic gain from the sweat of ones brow (or their work at a lab bench) ought not be treated any differently from the economic gain from ownership interest in a company… even if it is a very small piece of a company.

    Karl Marx would certainly agree with you there. I don’t.

    Consumption taxes are far less economically distorting than income and wealth taxes. But since that’s unlikely to happen any time soon, there’s still no good reason to tax corporate income.

  88. DeWitt Payne said

    I deleted the link closure for the link to Steve’s comment. Sorry about that. Edit function please.

  89. kim said

    The sun supplies enough energy to the earth and its atmosphere to sustain a human population a million times greater than it is today. We’re talking theoretically about quadrillions of humans souls, honey.
    ====================

  90. M. Simon said

    Solar/wind is not bad for places wit no electricity. I did a post on that a while back.

    http://powerandcontrol.blogspot.com/2006/11/neighborhood-development-package.html

    And in fact some places are now using solar to charge cheap laptops. For educating the kids. Look up: “One Laptop Per Child”.

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