The Sunday Times Magazine had an article about a former colleague of Mitt Romney who has written a book that is “a tightly argued case for just how much consumers actually benefit from the wealthy”. What I read was a tightly argued case for how out of touch the super rich really are.
So, the argument goes like this – rich people don’t spend or keep most of their money, they invest it in “productive businesses that make life better for everyone”. This is the usual defense for income inequality. But listen to some of the examples Conrad uses to make his point.
Conrad chose agriculture as a prime example and I quote – “since the 1940’s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profited from the innovations – like seed companies and fast-food restaurants – have made their owners rich, the average U.S. consumer has benefited far more”.
So I will not take the cheap shot about how wonderful it is to have a McDonalds on every corner in America. I will, instead, talk about the damage to food, in total, the innovations have caused. I love food. But, as the professor at Cornell said about his 40 years of seed development, nobody in the agribusiness ever asked him to make the food taste better. Our food is grown to withstand weeks of storage and transportation and look good enough on the shelf so that the consumer will buy it. How it tastes is irrelevant.
How much food costs is important – don’t get me wrong – but the act of eating food; something we should derive pleasure from three times a day, has been debased for the entire nation – including Mr. Conrad. If the trade off is pink slime and a tomato that can be successfully use as a baseball, I’ll take the higher cost.
Nanny State Nihilists will scream about how I want to legislate food production and control prices! Keep your hairshirts on boys. I can feel regret for what we have lost, but I don’t want any more legislative advantage to produce the outcome I want, than the agribusiness boys got to produce the outcome we now have. Fair trade?
OK - back to Mr. Conrad. Did you know that the 2008 financial meltdown could be understood by watching “It’s a Wonderful Life”? The whole thing was just a run on the banks! Yes, it seems that it was just like George Bailey said…”it’s in Mr. Smith’s house and Mr. Jones’s business…I don’t have it here”. YES! The blame lays with us poor hapless savers who demanded our money! The banks were doing what they were suppose to do by “putting short term money back into the economy”. This ignores the fact that the Ol’ Building and Loan actually lent out the money to local citizens and held the notes for the long term while Citibank sold off their notes to suckers for a quick cash profit. By the way, Conrad thinks the solution to this is to have a “government program that guarantees to bail out the banks if they ever face another run”. Folks, the economy is still very shaky; we are not out of the woods yet. Do you want Mitt Romney to guarantee a bailout of the banks? I know, guilt by association, but it still scares me.
Finally, I want to address what I see as the fatal flaw in the “lower taxes will generate more aggressive job creators” theory championed by Mr. Conrad. Let’s take Joe Wilson of the Xerox Corporation. Wilson inherited a profitable film coating business from his family. He then spent the next 25 years and most of the family fortune developing the first copy machine. Understand – the idea of placing a sheet of paper on a glass, pushing a button and getting a copy was Buck Rogers stuff in 1958. But Wilson did it! On September 16, 1959, in a demonstration at the Sherry-Netherland Hotel in New York, Wilson made copies in seconds. I bring Mr. Wilson into the discussion because in 1959, the marginal rate of the uppermost individual Federal income tax bracket was indeed an incredible 90-percent!
It did not seem to deter Mr. Wilson from his true nature as an innovator and “aggressive job creator”.
To further prove my point, in the 1980’s and 1990’s, when Reagan removed the onerous tax rates on the rich, Xerox got it’s corporate ass kicked by the Japanese and the Germans – two countries with huge social safety nets.
The 1940’s through the 1970’s saw the greatest increase in real wealth by an overwhelming majority of Americans. Innovation flourished under the responsible stewardship of government-subsidized grants. And the physical infrastructure of America – the roads, the power grid and the communications network were all built with taxes. Adam Smith said “the subject of every State ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the State”. The infrastructure we built and the content middle class that saw a life for their kids being better then their own, was derived from everyone paying their fair share in proportion to the revenue which they respectively enjoy under the protection of the State. In other words, Mr. Conrad is presently getting a free ride on his wealth and, sooner or later, the peasants will be at his door with their pitchforks and the State will not be able to help him.
Thomas Aquinas said it best “All material riches belong in common to the whole human race… The institution of private property exists for the purpose of enabling man to achieve the most effective use of material things”. If you think the quote is ammunition for the no tax crowd, you need to know that Aquinas was also one of the first people to promote a progressive tax system.