Elizabeth Warren is driving right wingers nuts

US senate candidate Elizabeth Warren wants wealthy Americans to pay more tax. The Bush administration put the country into a hole, she says. Tax cuts for the rich, two wars it put on a credit card, and an unfunded medicare drug program that poured money into the hands of drug companies. And now when wealthy Americans are asked to help out, they cry ‘class warfare’. Warren’s not having it :

There is nobody in this country who got rich on his own. Nobody.

You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for.

You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

As Will Wilkinson says: "This is precisely the sort of rhetoric Democrats need to perfect in order to hold ground in the next round of national elections." And that’s probably why Warren’s speech is driving libertarians and conservatives nuts.

At the American Thinker, Mercer Tyson is "deeply offended that she shows little appreciation for the wealthy people in this country who provide the capital that makes everything work." NRO’s Rich Lowry argues that since the top 10 percent of earners contribute 70 percent of all income tax revenue, rich factory owners have already contributed.

Perhaps what they want to say to America’s middle class is: "Think not what rich Americans can do for you, but what you can do for rich Americans."

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91 Responses to Elizabeth Warren is driving right wingers nuts

  1. hc says:

    Its a fun spiel but no more accurate than the Tyson/Lowry responses. I am not sure you can manufacture a case for higher taxes on the rich on the basis that they (alone?) benefited from public goods and equally you cannot justify the current tax regime by the view that the rich already pay lots of taxes and that increasing them will reduce economic efficiency.

    Its more accurate to recognise an efficiency/justice tradeoff and then try to set out the implications of this. Different countries resolve this tradeoff in different ways but in the case of the US almost all of the income gains from the last 20 years of growth have gone to the mega rich. The US has chosen an extreme point on this tradeoff.

    The typical US worker has not seen his or her wage grow. Partly this is due to increased competition from labour in rapidly growing developing countries. But the dramatic growth in incomes of the mega rich suggest something more than that. This group have been able to buy political power and control of the media. The non-traded goods sector incomes have taken off in areas such as finance that seem to be little more than socially-sanctified gambling with familiar dire costs accruing those who fund the gambles. Its an agency-based market failure.

    I agree with the implications of Warren’s argument but not the argument itself.

  2. Marks says:

    hc, you might be right about the point that her thinking does not necessarily justify tax increase, but it does two things:

    1). It changes the focus from ‘class warfare’ and ‘boo hoo’ the socialists are pitting American against American, sob’, to enable the question,

    2). Well how much tax should the wealthy be paying? Is the amount they are paying now fair, considering what they are receiving?

  3. Don Arthur says:

    Here’s Paul Krugman on Elizabeth Warren and the social contract:

    On the other side, we have the claim that the rich have the right to keep their money — which misses the point that all of us live in and benefit from being part of a larger society.

    Elizabeth Warren, the financial reformer who is now running for the United States Senate in Massachusetts, recently made some eloquent remarks to this effect that are, rightly, getting a lot of attention. “There is nobody in this country who got rich on his own. Nobody,” she declared, pointing out that the rich can only get rich thanks to the “social contract” that provides a decent, functioning society in which they can prosper.

    Which brings us back to those cries of “class warfare.”

    Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat.

    Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.

  4. KB Keynes says:

    She is correct on what you would to to balance the budget BUT unemployment is around 9%.

    Only complete economic illiterates would attempt fiscal consolidation now.

    As we observe in Europe these attempts fail and make both the deficit and debt worse.

    Wait until the economy recovers and then consolidate.As usual Australia is showing everyone how to do it and when to do it.

    Observe the last quarter national accounts in both the US and Australia.

    in both Countries the public sector was reducing growth.

    In Australia that makes sense in the US it makes nonsense.

  5. JC says:

    Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat.

    Really? Is Krugman aware that a very large number of sub S corporations that file tax returns as individuals are currently paying an effective tax rate of 44.5 and go over 50% with obamacare? Krugs must have forgotten to mention that.

    Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.

    The lucky ones are the 55% that don’t pay tax.

    Harry says:

    The typical US worker has not seen his or her wage grow. Partly this is due to increased competition from labour in rapidly growing developing countries.

    Really? Did Australians experience that as well? I suggest you and other ought to be looking at the elephant in the cupboard; 12 million illegals that has impacted on the bottom 25 million Americans incomes. While the capacity to create those extra jobs has been astonishing over the last 25 years, it has had an impact on real wages, especially in the bottom quintile.

    But the dramatic growth in incomes of the mega rich suggest something more than that. This group have been able to buy political power and control of the media

    You are confusing income with wealth. Warren Buffet ( Mr Integrity) did not grow rich from drawing down that famous $100,000 a year in salary. He grew wealthy from investing in some great stocks and letting compounding take its course. Is that the sort of “income” you’re thinking about? It’s not is it?

    The non-traded goods sector incomes have taken off in areas such as finance that seem to be little more than socially-sanctified gambling with familiar dire costs accruing those who fund the gambles. Its an agency-based market failure.

    Fair dinkum Harry, is there anything you don’t categorize as market failure? Everything you personally don’t like is market failure.

    Banking helped fund, either through lending or capital raising global GDP growth for the last 25 years. It’s been an astonishing ride for the world.

    Without going into into the reasons for the banking failure, total losses as a result of the 2008 crisis has been estimated by Morgan Stanley to be around $1 trillion. Bank failures and balance sheet recessions have been part of our history even before the Industrial revolution. There’s nothing new in that.

    Here’s Bank of America’s last quarter’s 10Q. Please show us where all the gambling is taking place in the income statement. Go ahead, as I’d be really interested in your analysis.

    Elizabeth Warren wasn’t confirmed as the head of a consumer banking regulator because she’s off her head. If she had her way banks would not be allowed to earn any fees and consumer laws would mean the banks would lose in almost every single legal dispute. One of the few good things to occur was that she wasn’t confirmed by the Senate and the Democrats didn’t even fight for her, as she was far too extreme. Even Treasury Secretary Geithner thought she was an extremist nutcase and agitated for her removal at the new regulator.

    Despite all of that it wouldn’t shock me in the least if she was elected in the People’s Republic of Massachusetts.

  6. Don Arthur says:

    The lucky ones are the 55% that don’t pay tax.

    Fifty five percent of Americans don’t pay tax? Here’s how Howard Gleckman explains the numbers on TaxVox:

    About half of taxpayers paid no federal income tax last year. It does not mean they paid no tax at all. Many shelled out Social Security and Medicare payroll taxes. In fact, only 14 percent of Americans didn’t pay either income or payroll taxes. Some paid property taxes and, it is fair to say, just about all of them paid sales taxes of one kind or another. So to say they pay no taxes is flat wrong.

    However, this class warfare-like rhetoric plays to a perception that the income tax is a chump tax: Only hard-working folks like us pay it. The welfare queens don’t. The super-rich don’t. It is a powerful emotional argument. It is also flat wrong.

  7. JC says:

    Don

    Everyone pays FICA, but that isn’t supposed to be a tax, as we were often reminded by both sides of politics. It was supposed be a “pay in” to fund our pension and medicare on retirement for the most part. Talk to the Federal government why they treat it as part of general revenue.

  8. KB Keynes says:

    Under Ronald Reagan in the 1986 tax act Warren Buffet’s tax rate was at least the same as his secretary.

    This changed under Bush.

  9. Patrick says:

    Buffet could just pay himself what he’s worth, rather than collect it as dividends and capital gains. Nothing stopping him, and pam, that great weight of iniquity would be lifted from his shoulders and he would pay a higher rate than his secretary, for ever and ever amen.

    Salvation sometimes truly is closer than we think.

    Also, while he’s in full epiphany he could instruct Berkshire Hathaway’s tax department to be more honest, per note 15 on pp. 54-56 of the latest annual report

    We anticipate that we will resolve all adjustments proposed by the U.S. Internal Revenue Service (‘IRS’) for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months. The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years

    Now, personally, I think that there is nothing necessarily wrong with taking a different view to the IRS. But it’s a hell of an odd position for Buffet to be taking in this particularly hypocritical phase of his life.

  10. JC says:

    Buffet could just pay himself what he’s worth, rather than collect it as dividends and capital gains.

    Mr. Integrity’s Berkshire Hathaway has never paid a dividend, Patrick. *Ever. Mr. Integrity is compound interest obsessive.

    He believes a company shouldn’t pay divs (he’s possibly right). He says let the return accumulate at the tax free compounded rate and if a stockholder needs money s/he can sell a certain number of stocks and only pay the cap gains tax on exist, otherwise divs are treated as ordinary income in the US and attract a higher tax rate. That’s what he’s said in the past anyway.

    He’s so compound return obsessed the bugger has lived in the same house since the 60’s, otherwise he’d would’ve had to pay cap gains tax on the sale, which would have interfered with the compound return.

    *Go the the chart.. click “all” period and take a look. There’s no D for Div at the bottom of the chart.

  11. Patrick says:

    OK, so he gets only capital gains. I guess if you can, why not?

    But I’m not sure what you mean by a tax free compound rate – the company pays tax on interest too? It surely isn’t different to you getting a dividend and investing the money?

  12. Patrick says:

    Oops, apart from the double tax on the dividend (in America at least), but after that you are both in a pretty good position except you’ve paid the double tax pre-‘compounding’ rather than post (on the compounded amount).

  13. JC says:

    But I’m not sure what you mean by a tax free compound rate – the company pays tax on interest too? It surely isn’t different to you getting a dividend and investing the money?

    What Buffet was saying is that a firm shouldn’t pay divs, as the money is notionally reinvested at the company’s growth rate. Yes you’re right, strictly speaking the firm is still paying the corp tax, but divs are double taxed over there so you can avoid tax on the divs if you don’t need the money and only pay at the cap gains if you require money and sell stock. It does make sense if a company is growing the bottom line.

    Before he started to get into the business of being an insider investor avoiding the traps of the hoi polloi, what was staggering about his investments was just what sort obvious well known companies they were. Not obvious in he sense that any investor could prick them, just that they don’t do anything startling.

    He’s owned Proctor and Gamble (P&G) since forever. To us mere mortals it’s a boring soap detergent maker, right? How the hell do you make decent money out of that if you stumble on it.

    Look at the chart… He probably has a weighted average purchase on the stock of around one buck and change, as I think he’s owned this stock since the 60’s. It now trades around 60 bucks. Since the 80’s it’s had 5 2 for 1 splits. So even if you say took his holding in PG since the 80’s when the stock was trading at 2.50 , factored in the 5 splits, 1000 shares ($2,500) of PG with the splits would be worth $456,000 since 1981. That’s an astounding 11,300% return or 19% compound pa for 30 years. No wonder he loves compounding and is obsessive about it over oceans of time.

  14. Elizabeth Warren is a Harvard Law Professor, spent lots of time in & around government. She’s unable to break the umbilical cord. She is a grant-monkey, who has never worked out how to make a quid on her own.

    This is why she speaks such rubbish on economic policy.

  15. hc says:

    As opposed to publicans whose rich life experiences qualify them eminently to pontificate on economic policy and who never need to rely on ad hominems to make a point.

    How about dealing with her claims Steve?

  16. JC says:

    I’d more trust a publican’s “rich life experiences” than Warren’s understanding of banking Harry and yours too if you support her.

    Harry (More on the Banks are gambling schtick)

    You accuse banks of gambling, yea? What’s your descriptor for what’s happening in Europe where banks holding “risk free” government bonds could possibly take down the entire Western Banking system?

    Lets recall that banks are forced to hold bonds in order to meet regulatory required liquidity ratios.

    Would you suggest that in such a case (where the Western banking system goes down the toilet) the banks aren’t gambling and it’s just bad luck? You know, if the state is the cause, well that’s okay then.

    On Warren

    Megan McArdle suggests peer review seemed to have failed in properly analyzing and picking up what appears to be spurious claims by Warren in a study aggressively peddling higher bankruptcies. My interpretation: Warren lied and made it all up.

    Here’s McArdle

    That’s a pattern I see over and over in her work. In her (in)famous paper on medical bankruptcies in 2001, Warren and her co-authors defined anyone with $1000 worth of medical bills as having a medical bankruptcy, and used that figure to imply that rising medical bills were pushing people over the financial edge. Now maybe they are, but you sure couldn’t prove it with that metric. I hope to hell that no lawyer (Warren is a law professor) would advise a client with no debt but $1,000 worth of medical bills to declare bankruptcy, because doing so would be malpractice*.

    Relating to her arguments in the vid. Warren is attacking a strawman and surprised she hasn’t been picked up on it.

    The fact is that the wealthy in America pay far more than their fair hare. So the rich are more than paying for roads, cops and firemen Warren brings up in her spiel. Furthermore the costs she mentions are state issues. Warren even seems to be confused whether she’s running for state or Federal office, as these expenditures are state in the US, not Federal.

    We haven’t heard arguments from the rich that they want to pay less and the difference should be slogged to the lower income earners. All they want is not to be slugged for higher taxes and seem to be quite happy paying more than their fair share for roads, cops and firemen than lower income earners. Warren’s is bad argument because the facts to even come close to what she is suggesting. It’s populist poppycock.

    No wonder Geithner didn’t want a thing to do with her and helped diss her appointment at the consumer bureau. She’s a nutcase. And Geithner hardly comes from the right wing of the Republican Party last time I looked.

    (McArdle does a two part series on Warren that is worth reading).

  17. rog says:

    This is the Warren study, published in the peer reviewed AMJMED

  18. . says:

    That’s a pattern I see over and over in her work. In her (in)famous paper on medical bankruptcies in 2001, Warren and her co-authors defined anyone with $1000 worth of medical bills as having a medical bankruptcy

    What a lying scumbag. Anyone who by definition doesn’t prepay for surgery is bankrupt. A complete and utter academic fraud. Whoever called her a nutcase was right.

    My mother and father have been “bankrupted” multiple times, despite never having actually been bankrupt, and retiring comfortably and debt free.

    This charlatan won’t be remembered for long.

  19. . says:

    The utter cowardice of this blog that lets “Sally” continue to slander me without a right of reply. Why do you allow that kind of behaviour?

  20. . says:

    Sally said:
    Here is “.”s own account of one night post bank tellers’ confest in New Orleans last month.

    “Bourbon Street shone brighter than a Klieg-lit car dealership, its jangling chain of jazz, rock, and zydeco rhythms bouncing raucously from door to door. Bemused by the glare and noise, yet oddly buoyed by the six triple-shot Hurricanes I’d imbued at “Club Razoo,” I shamble onto the concourse.

    Widening my stance for vertical stability and clumsily keying my digital recorder, I accost the next feminine passerby – a bounding, fresh-faced gazelle, a local barmaid:

    Dot: Know ya got pretties’ eyes whole craz’ town? Jus’ full love.

    Passerby: Huh?

    Dot: Simp’ mos’ beautiv’ girl seen whole life!

    Passerby: Uh-huh, sure. Bye!

    Posted on 24-Sep-11 at 3:21 pm | Permalink

    Sally said:
    “.” you torture language and logic and all auditory and sensory outputs of all readers of this blog. Just for starters. You’re a member of the LDP and Shooters Party who want to hunt and fish to extinction koalas and tawny frogmouths, and crayfish in the 2% of territory currently protected as national park.

    Presumably, this is the adult male version of kicking dogs down staircases, cutting off cats’ paws and throwing fireworks into the nests of currawongs.

    Posted on 24-Sep-11 at 3:39 pm | Permalink

    You are simply enablers.

  21. KB Keynes says:

    ‘The utter cowardice of this blog that lets “Sally” continue to slander me without a right of reply. Why do you allow that kind of behaviour?’

    the irony is rich

  22. . says:

    Homer,

    When you have the right of reply, you end up boning yourself as you can never keep your story consistent.

    It’s for your own good that you get cut off.

  23. KB Keynes says:

    Says the person who always bones himself.

    Try looking up projection Marky.

    Everything you complain about is in the mirror

  24. Pedro says:

    “which misses the point that all of us live in and benefit from being part of a larger society.”

    I never understand why people think this a good argument. People get rich from selling things to others in the larger society. Yes, absent the society they could not get so rich, but if the society delivers a certain level of profit through market operations then why should there be any requirement for a further reduction in the profit level relative to other members of society?

    The people shopping at Walmart also benefit from the roads delivering their goods, so the Walmart company is not receiving any extra benefit from the commons.

    Arguments about education spending don’t really wash either. The most you can fairly say is that anyone who gets a free or subsidised education ought to pay the cost of that from future taxes, but that is not an argument for paying to educate the dope next door.

    I can see an argument on pragmatic grounds, but the moral argument is really the just the preference of A’s opinion over B’s.

    I suppose you can’t make the same claims about Warren’s income because it is not market determined.

  25. Peter Whiteford says:

    Pedro

    Warren is a law professor at Harvard, so I would guess her income is market determined.

  26. Dan says:

    Pedro @25:

    “I never understand why people think this a good argument. People get rich from selling things to others in the larger society.”

    Yes, but no – Warren’s point is that society provides the social and physical infrastructure needed for the effective operation of ever-larger and more complex markets. And anyone who knows a bit of economic history will grant it.

  27. Paul Frijters says:

    Don,

    good points. I fully agree with them. For the life of me, I cant see why Harry Clarke would want to disagree with the basic argument that the successful business person uses a disproportionate amount of public goods (the bigger the business, the more roads, harbours, education, etc. they will use). Whilst there are many other arguments one can make for why the rich should pay more taxes (equity, efficiency, expediency), the argument that they are major beneficiaries of public investments and hence owe the rest of society some of their gains seems perfectly valid.

  28. JC says:

    …..the argument that they are major beneficiaries of public investments and hence owe the rest of society some of their gains seems perfectly valid.

    Paul, to use an extreme example… would George Soros. a well known fund manager use more or less in public resources in terms of what you have in mind?

  29. Pedro says:

    Peter W: Doh! I thought she was a senator.

    Dan, umm, I recognised that, but everyone benefits from the infrastucture, including the welfare queen or king who drives to Walmart to get snapped by security cameras and posted on the people of walmart website.

    “I cant see why Harry Clarke would want to disagree with the basic argument that the successful business person uses a disproportionate amount of public goods (the bigger the business, the more roads, harbours, education, etc. they will use).”

    Paul, don’t those rich people ship their goods to shops and ultimately consumers, who therefore are equally using the roads etc? Goods are sent to where a demand exists. Also, the extent you use the commons is not related to the amount of profit you make. For the claim to have an moral force it implies a proportionality between wealth and benefit from the commons, but you cannot show that proportionality.

    Efficiency and expediency can be arguments for all sorts of things that are ethically hard to justify. The equity argument for progressive tax is not qualitively different to the equity argument for a poll tax.

  30. Dan says:

    As if the head of a multinational is not deriving orders of magnitude more benefit, commercially and thus personally, from public infrastructure, than Mr Everyman.

    Not to mention earning far beyond his ability to spend.

    I have no ethical problem whatsoever with coming down on the rich hard, and day by day the rich are coming out saying the same thing (today it was an ex-senior Google guy).

  31. Paul Frijters says:

    Pedro,

    I would turn the question around: who would still be earning what if there was no public sector?

  32. Pedro says:

    Paul, how does that question get you from a poll tax to a progressive tax?

    Dan, but maybe those people are also investing and creating jobs? But they are not making orders of magnitude more money because of the public sector, its because of their efforts and ability. And still, every widget travels the road or rail to get to its buyer.

  33. jc says:

    Paul

    Do you as an individual have a choice about having a public sector, or what parts you want and don’t?

    Much of her thinking, if you could even call it that assumes there is no value in private exchange, or that it’s simply one sided. How about the benefits derived by consumers from exchange?

    Lastly the things she talks about are more than paid for by taxes. If only people were asked to pay through taxes the things she mentions, the deficit would move into surplus and there would be room for substantial tax cuts too.

    All Warren is doing is going after a minority which for the American left is always fair game….eat the rich.

  34. Dan says:

    Pedro: if they were investing and creating jobs, there’d be no problem at present. They ain’t.

    As for the second thing you asked: I disagree – but in any event it’s missing the main point. How did they *get* to be where they are? What sorts of institutions need to be in place for others to achieve their economic potential?

  35. Pedro says:

    Dan, do you think that the prosperous capitalist system that we all love so much ante or post dated the welfare state?

    As for the necessary institutions, they surely provide an opportunity for all, so why should the people who’s higher talents, effort and thrift lead to great wealth have to pay more for the equal opportunity available to all? By the way, I think the number of necessary institutions is considerably less than we actually have. I think your argument boils down to: “just because”.

    Yes, people might not be investing so much at the moment, but will higher taxes change that?

  36. Sally says:

    Actually, the welfare state predated capitalism. It first existed under Bismarck.

  37. Sally says:

    And of course under “primitive communism,” which is a fair description of many hunter-gatherer/early agricultural settler societies, as Engels and anthropologists from Morgan to Reed have shown, all people were materially provided for equally in what were probably matriarchal societies (where lineage was traced through the female line and (relatedly) women held a revered position because of their unique and pre-eminent role in reproducing the species and in creating the means for new life through horticulture – which women probably invented).

  38. Dan says:

    If you think that equal opportunity is available to all, you’re from a different planet.

  39. Dan says:

    Laissez-faire was seen to be a failure pretty much as soon as it emerged. Heck, the *capitalists* of day knew a race to the bottom when they saw one. Let alone other social thinkers.

  40. Dan says:

    As for investment: if someone earns, say, $5bn which he plans to save (because confidence is down), and the government takes $1bn and employs, say, 2,000 people, that sounds like a great outcome to me.

  41. Pedro says:

    Sally: WoN published 1776, Bismark’s reforms 1880s, Sally having a clue …?

    Dan, depends on whether you are the one or one of the 2,000. How would you feel if the 2,000 people just took the money by force, and how is that different? This is not an argument about govt or no govt, just the limits.

    I might be on a different planet, but the commons you assert are the justification for progressive tax and redistribution are available to all. Through no fault of the rich, some people fail, and some people are unable, to take full advantage.

    Of course, I expect there would be less squealing about progressive taxation if the money was only being used for the common welfare, but the big spend in on individual welfare. I don’t think Gerry Harvey gets more rich if money is taken from him in taxes and then given to a pensioner who, among other things, buys a TV from his shop. So I don’t see how anyone can claim that the rich ought to pay more for welfare because their super profits are benefits of the welfare system.

    What do you think are the fetters that should be placed on govts taking property, toil or treasure for the general benefit?

  42. Dan says:

    Free and fair elections. A free and diverse press. Government accountability and transparency mechanisms.

    On the other hand, I think the *mandate* that should be placed on governments levying taxes are: Do we live in a decent society? Insofar as we can collectively afford it, are people having their basic needs met?

  43. Pedro says:

    So conscription would be ok, if by a democratically elected govt? Or the repeal of the Native Title Act?

    I suppose a difficult question is the definition of basic needs. A second question is whether a decent society is the result of the many extracting money from the few with threats of violence.

    I think the reason people who favour redistribution look for justifications is that the concept otherwise looks a bit ordinary. This discussion started with the assertion that the rich owe high (in fact higher) taxes because of the disproportionate benefit they get from society, but that clear and proportional connection is not easy to make, so we are left with competing visions of the decent society, with the difference essentially depending on different weights given to the individual and the mass.

    Each no doubt thinks that hiding behind the other’s veil is a “just because”. But I really do think that the argument for the primacy of the individual is the far easier to make, and once accepted, redistribution has to justified by pragmatism and not sentiment.

  44. Dan says:

    Poor people – the very poorest, the sick and infirm, and mentally ill ones – are individuals too, of course. I think it’s good to have a comprehensive system of social insurance for them (and so did Hayek, who I’m paraphrasing).

    I *don’t* think you’re hiding behind a “just because” – and neither am I. I genuinely think you have trouble seeing what economic power is, how it is exercised, and why the winners win and the losers lose.

  45. Dan says:

    “I think the reason people who favour redistribution look for justifications is that the concept otherwise looks a bit ordinary.”

    Uhm, this argument kind of implodes. Of course if there weren’t justifications for redistribution, it wouldn’t be justified.

  46. Sally says:

    Dan, Pedro is not the brightest star in the far right firmament. But he tries, we must give the poor old boy that.

  47. rog says:

    In Pedros wonderful libertarian world everybody has perfect teeth, hair and a body to die for.

  48. Dan says:

    Sally: Yes…

    rog: Not just Pedro. Haven’t these people ever met a hardworking poor person who can’t seem to get a break? There’s plenty out there.

  49. observa says:

    Well Warren, howsabout we have an ANWT for the top end of town? Did I hear someone mention ‘rent’ around here? That way we could get rid of income and payroll tax and the like on the real ‘workers’, coupled with a further shift to fossil fuel and resource taxing in general. You know, the stuff the wealthy rentiers really chew up in abundance while taking advantage of the thorny old problem of measuring income temporally.

    Nope! We’ll just have even more taxes naturally, but a heap more regulations to up all those rents-
    http://www.adelaidenow.com.au/news/south-australia/legislation-to-end-urban-sprawl-in-barossa-valley-and-mclaren-vale/story-e6frea83-1226149319399?from=public_rss

  50. Pedro says:

    rog, your usual strawman. Ok sally, you got me again, cut to the quick.

    Dan, I don’t deny the existence of the hardworking poor, for the first chunk of my life that was my family, though my mum did end up getting “a break”, by starting a business, working hard and investing, and having the “luck” to become a well regarded interior designer, so now we are comfortably middle class types.

    And sure, economic power has its benefits, but plenty of economically unpowerful people make enough money through hard work and talent to cop the high tax rates.

    I didn’t even say we should not have a welfare state, I’ve only said that the justifications are more pragmatic than moral. What is important about that distinction is how if frames the quantitive question.

  51. Dan says:

    You’re skirting around the issue.

    Should we have a welfare state?

    If so, why? (If it’s not some sort of a moral vision of what society will be like, followed by a pragmatic “…and this is how, in the real world, we achieve such an outcome”, I’ll be very surprised.)

  52. Dan says:

    “…make enough money through hard work and talent…”

    And luck. You forgot luck, which is funny because Bill Gates isn’t. And the kicker is that those born well-off seem to have a great deal more of the stuff.

  53. Dan says:

    *isn’t -> didn’t

  54. Pedro says:

    I don’t know what bill gates isn’t, but he is good at making money. doesn’t matter what you think of him or his business methods, from a garage or whatever he built a business by selling products. It’s kinda hard to see him as an example of a person against whom the poor have a moral claim for money. I don’t see how being Richie Rich gives the poor a moral claim to his money either. If Richie’s dad made a motza how does his death liberate that money for the poor?

    I have not been skirting around the question of whether there should be a welfare state. The thread started with the assertion that Warren had articulated a good reason why the rich should pay more tax. I’ve just been disagreeing that it is a good reason and asserting that there is no obvious link between getting rich and disproportionately benefiting from the State.

    If you want my views then I think some people don’t get enough support, like the mentally ill and the truly disabled, some get too much, there is insufficient use of means testing, and there is a bunch of welfare spending that ought to be abandoned or majorly revamped.

  55. Dan says:

    Nono, I mean Bill Gates himself ascribes a great deal of his fortune to… good fortune.

    Okay – so you’re interested in *reforms* of the welfare state to make sure those that need support get it. That’s good! We’re pretty much on the same page there. I guess it’s just a question of what that entails.

  56. Patrick says:

    Hasn’t Pedro won?

    Youse all seem to have given up on arguing that the rich should pay due to some proportionately greater benefit and resorted to a moral argument. Which is fine but is quite different to the original argument.

    Fair enough too, it seems rather oxymoronic to argue that the rich derive a proportionately greater benefit from public goods and simultaneously believe in dimimishing marginal utility of money.

  57. Dan says:

    Not oxymoronic at all; in fact they’re the two planks of the argument. To be clear:

    -the rich derive a greater benefit in absolute terms (to be clear – the number of $ that are going into their bank accounts).

    -but those $ do have diminishing marginal utility, making it sensible to redistribute them.

  58. FDB says:

    Dan – yeah, I thought that was obvious too. But Patrick’s right, the discussion’s morphed away from where it was. So I offer the following for Pedro.

    Public infrastructure doesn’t only benefit rich businessfolk directly, does it? It’s not just the road that runs up to the factory gates, is it?

    The sustenance (including by public infrastructure, education and services) of large, mobile, peaceful populations of consumers is the very reason businesses can succeed.

    So calculating the benefit wealthy people derive from public spending can’t be as simple as accounting for their personal and business use of same, but that of all their customers too. A fraction thereof I suppose, as a function of how much each uses and has to spend?

    But I ain’t no econometrician, as should be obvious.

  59. observa says:

    Buffett says-
    “But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
    or in other words the wealthy get to extract a larger social rent once they become ‘wealthy’. How wealthy should an individual be before the society begins to extract that rent is a good question but nevertheless the left generally have a predisposition for making sure as few as possible get there with their preference for progressive income tax. That’s difficult to measure temporally, with clear disincentives due to progressive tax scales as well promoting the attraction of capital gain to avoid same (ie stashing away rent along the way) Why not leave that for an Annual Net Wealth Tax once they’ve ‘made it’ so to speak and have reached that pre-determined social rent threshold Buffett, et al are happy to have deemed back to the good society. Get rid of income tax and benefit of gearing or untriggered capital gains, thereby enjoying even more personal rent extraction in the process vis a vis say PAYG taxpayers.

    So you’ve ‘made it’ and need to cough up that social rent. It’a all tied up in the factory and your McMansion, etc with all the public roads leading to them. But what if its Buffet’s modest abode and a big chunk of Daintree rainforest you’ve got tucked away for posterity because you believe it needs protecting from the bulldozers for future generations? Same value of wealth, same rent to pay or not? Any ANWT would need to accommodate that difference or would it? Silly bloody Greeny with too much loot and he’ll pay the same while we leave all that to regulation like those MacLaren Vale development restrictions that will create more rent for the lucky ones already there. Just like the good folk at Morgan Sachs Macquarie and Co with the creation of some carbon credits to play with.

    But never mind some rents are more equal than others for the leftist hive mind, as a certain newspaper columnist discovered when he dared query that some rentseekers were going a bit beyond the pale in hogging some rent that was to be given back by the good society to those they considered had come up a bit short. Yes some rents are definitely more equal than others in some quarters and don’t you dare criticise their judgement on that or else! It’s a feel kinda thingy and the left know best.

  60. Pedro says:

    Dan, just because Gates says it you believe it? But it is true in one sense. Lots of great ideas never make people any money. Gates was lucky to sell DOS to IBM, but he still earned the money.

    Are they really two planks in the same argument. The utility argument is quite different from the Warren claim, I should have thought. Utilitarianism is a different species of moral reasoning. I certainly agree that utility arguments are made for redistribution, but are you a selective utilitarian or the whole bottle? I notice you didn’t answer the question about conscription, so I guess you are not a full-blooded utilitarian.

    FDB, only the rich benefit from a peaceful society? I should have thought a wander through the history section would demonstrate that in the less peaceful and secure world of the past, there was only the rich and the poor, with not much in between. The growth of the middle class and the modern state followed the initial explosion in great wealth brought about by the industrial revolution.

    I’ll say it again, the truck leaves the factory and takes goods to the consumer. The difference is wealth between factory owner and consumer is not due to the proportional use of the road, but to the work, investment and intelligence of the factory owner.

    If you take a big risk, work hard, and your business fails, you end up broke and on the dole. If your business succeeds you suddenly become the person who won the lottery of life, taking a disproportionate benefit from society, and you have to pay the dole for others.

  61. Dan says:

    Re: conscription – sorry, missed that. I’m opposed *on principle* for both reasons of individual freedom and also because I think most armed conflict represents a failure to solve problems more imaginatively (“If all you have is a hammer…”). I’m not sure that means there are *no* instances in which it is justified.

    Morally I’m a “reverse utilitarian”; ie. I weight suffering as much more significant than pleasure in terms of moral calculus.

  62. FDB says:

    Pedro:

    FDB, only the rich benefit from a peaceful society?

    I don’t think you really read what I wrote. Which was in a nutshell that the rich benefit from

    public spending

    both directly (like everybody else, they and their businesses can use the roads, be protected by the police etc) and also indirectly, in that their pool of customers is kept healthy, mobile, educated and ready to make purchases.

    Geddit now?

  63. observa says:

    And here’s why income and company tax are beyond their use by date-
    http://www.news.com.au/business/australia-is-selling-off-inheritance/story-e6frfm1i-1226153395162
    Gillard, Swan and Co are on the right track with more reliance on resource and carbon taxing although they don’t know where it should ultimately be going.

  64. Pedro says:

    FDB, I did read you, but perhaps oversimplified your position in my response. I thought you were trying to make the claim that the rich should pay higher taxes because they get to make so much money from the public spending. Now I see you weren’t making any clear point at all. But I agree that govt spending benefits everyone so there is nothing about the nature of the spending or its effects that will provide a justification for a proportionately higher level of tax on the weathy.

  65. Pedro says:

    Dan, is the greatest extent of happiness going to be different to the lease extent of misery? I suppose it might if there is an intermediate state of sullen indifference or something. But does that mean you are still a trolley-stopper, so borrow from the article Don Arthur helpfully linked?

  66. Dan says:

    Pedro: I honestly can’t look you in the eye and say (let alone unequivocally) that I’d push the fat guy. That doesn’t mean that I don’t have views about the individual’s responsibility to the collective (and the reciprocal arrangement).

    Re: utilitarianism vs. reverse utilitarianism – yes, there is a difference.

    Re: sullen indifference – I think this is where most people spend a great deal of their time in the west, material circumstances notwithstanding.

  67. Pedro says:

    Line drawing is always the hardest thing. Our various policy preferences are individual and so there is no common view, just usually a band with lots of views and then the outliers. In the end it is all pragmatism.

  68. Dan says:

    And I think this is what Warren is on about; a moral vision of how society ought to be organised. You can either find it convincing or not.

  69. Patrick says:

    So Pedro wins, it is morality or perhaps pragmatism after all, but whilst Warren might be on about whatever she wants to be on about she has made her point badly.

    [email protected] is just punting into the wind and hoping for the best and no-one has demonstrated (or even tried to with any seriousness) that rich people derive a greater benefit from public goods.

    Unless, of course, someone can demonstrate any way in which either plank of Dan’s ‘two planks’ depends on or assists the other, other than that they are two separate arguments for the same thing.

  70. Dan says:

    Oh! I thought it was self-evident to most thinking people. Rich people *individually* derive monetary benefit from not just their own use of public goods, but others’ use of public goods as well. You can tell that because they’re a) richer, ie. benefiting from more or larger economic transactions, and b) there’s fewer of them (so even if – absurdly – they earned the same income as the “non-rich”, however defined, they’d be receiving proportionally more benefit).

  71. Dan says:

    If you think the rich *deserve* to keep their wealth despite that, fine – that’s the concession that I made at 69. I’m not at all convinced, a) because I think this “just acquistion” stuff is horseshit, and b) because I think redistribution of the dollars leads to better outcomes overall – the rich guy’s quality of life won’t be directly impacted much, while the money can be used to greatly improve many others’ quality of life. For, say, a billionaire, it may in practice even be Pareto optimal (he’s never going to get to spend the money anyway, except as a way to make more money which he can’t spend, except as… etc. etc.)

    Remember – Keynes was interested in *saving* markets, not destroying them. I’d put myself under that banner too.

  72. Pedro says:

    Dan, good to know you’re with us. But, everyone benefits from the commons, the question is still whether the rich derive a disproportionate benefit. Does a company making no profit from the goods it sells receive less of a benefit compared to a company selling the same amount of goods at a profit?

  73. Dan says:

    Sure – I’m interested to see what you’re getting at though, because of course a company with a profit of $0 would pay no company tax.

  74. FDB says:

    “Rich people *individually* derive monetary benefit from not just their own use of public goods, but others’ use of public goods as well.”

    Yes Dan, that’s what I said twice.

    I’m not sure how Pedro missed it, three times now, or how it is for Patrick not a ‘serious’ argument.

  75. Dan says:

    I know! Apologies for repeating your point. What do these people think we’re missing!?

  76. FDB says:

    A fair enough question I suppose. I’m pretty sure I understand their arguments, as they presumably think they get ours.

    And it doesn’t FEEL like a bad faith conversation to me, so I must consider the possibility that I’m missing something too.

  77. Dan says:

    I think really this argument comes back to the idea of just acquisition. Pedro insists that the rich *earn* all their money; I contest that and argue, like Myrdal, that wealth (and, for that matter, disadvantage) has accumulatory properties.

    If you don’t think the rich earn (all of) their wealth – and frankly I think it is hard to see how Richard Branson is orders of magnitude smarter, more talented, or harder-working than anyone who doesn’t possess and equivalent fortune, or for that matter that I’ve *earned* my inheritance; heck, being born in the first world is just dumb luck – the moral argument for making sure they keep it disappears.

    This leaves the moral argument about how it can be distributed to best address the common good.

  78. FDB says:

    or for that matter that I’ve *earned* my inheritance

    The only persuasive argument I’ve heard for just inheritance comes at it from the other direction – that a wealthy person has earned the right to give their offspring (and genetic material) the best possible chance in life. It’s a far better argument than that rich kids ‘deserve’ their lot.

  79. Dan says:

    Even this goes out the window if the money’s been in the family for more than one generation; ie. the person requesting the money didn’t earn it, their parents or grandparents did (I continue to use “earn” loosely, of course).

  80. Dan says:

    *bequesting – stupid autocorrect. Bequeathing?

  81. Patrick says:

    I think you two and Pedro are sort of talking past each other (surprise!).

    We started with the proposition that the rich derive a proportionally greater benefit from taxpayer-funded public goods than the poor. In support of this you have offered, in essence, that the rich make a greater financial surplus than the poor ergo benefit more. Pedro’s response, in essence, is that since everyone gets ‘free’ use of taxpayer-funded public goods, the poor necessarily derive a greater benefit since they could less afford to pay for them. I.e., if you are Steve Jobs you will get a new kidney by booking at every cancer centre in the country and flying there – taxpayer-funded public goods be damned, if you are a poor (or indeed ordinary) person you will get a new kidney if and only to the extent that the taxpayer-funded public goods exist and work.

    Sure, the rich derive their profits from the use of public goods but people seem able to become very rich in the absence of significant public goods (often, of course, by manipulating the regulatory environment). I.e. sure the rich will always ‘have it easy’ but this is not about public goods! The poor on the other hand benefit immeasurably from eg medical care, roads, schools, etc.

    There is then a sidetrack of Dan and FDB saying that they should pay more on moral grounds, but however you cut it this is rather independent of the first point (it is consistent with it, but that is a different thing).

    One way of illustrating the problem with your argument about a greater financial surplus appears to me to be the following hypothetical:

    If you could choose only one of the following, with the other being to chance, which would you choose:
    (1) to live in a third-world or first-world country; or
    (2) to be rich or poor.

    I’m tipping most people would choose the money, and take their chances as to the existence of taxpayer-funded public goods. Am I right?

    If I’m right, how does this reconcile with the theory that the rich derive a proportionately greater benefit from public goods when you’d rather be rich with no public goods than poor with lots of public goods?

  82. Dan says:

    Patrick – this is a great contribution.

    Me, I’d take option 1; give me a decent society over personal material wealth any day (not trying to make out like I’m some sort of angel here, but I think about ethics and equity a lot more than I do about my – comfortably middle class – material wealth).

    I don’t know whether that’s a majority view, though I certainly hope it is.

  83. Dan says:

    The other thing is that one could plausibly make an argument that many rich people in poor countries got rich of *other* nations’ public wealth :P

    Maybe Chinese plutocrats should be sent a tax bill by the IRS on the proviso that it’ll make it easier for them to do yet more business? Ha.

  84. FDB says:

    Sure, the rich derive their profits from the use of public goods but people seem able to become very rich in the absence of significant public goods

    Yes, but not without, as I’ve repeatedly failed to get you or Pedro to acknowledge, their customers using same.

    There is then a sidetrack of Dan and FDB saying that they should pay more on moral grounds

    When have I said that?

  85. Patrick says:

    Dan I agree with #84 although I don’t think you meant it as an anti-foreign aid polemic.

    I would probably choose 1 as well, since I would be confident of my benefiting from those public goods whether or not rich, in particular, security education and health would vastly improve my or my progeny’s chances of becoming rich…which is kinda why people migrate isn’t it?

  86. Dan says:

    Sure, although I chose 1 for moral reasons, not because I give a toss about my or my kids’ chances of being rich. When traveling in less equitable countries, it makes me sad and angry to see so much wasted potential and unnecessary misery.

    I probably sound like a complete bleeding heart now, but when I look at the world that’s one of the things that seems important to me.

  87. Dan says:

    Just happened across this one from that noted socialist Adam Smith:

    “The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

  88. Pedro says:

    So Smith favoured redistribution and progressive tax on pragmatic grounds. I’m glad to see you’ve fully come round to my way of thinking about the original proposition.

  89. Dan says:

    Looks like an ethical argument to me, but in any event, I just wanted to share the quote.

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