Thoughts & Opinions? re: being wealthy

[m_h_lovecraft]

How much do the obscenely wealthy (annual net income $10 million or more) contribute to the national economy? I ask because if one is obscenely wealthy they remain so despite the percentage of taxes paid, hence none of them would appear to be having a hard time buying a yacht or something. To wit, why is there an argument that tax cuts for the rich somehow stimulate the economy if their buying power was never diminished in the first place? Thoughts?

[jagguy]

1. its not the boats and cars they buy

its the production lines they start up, the factory upgrades, the R&D, the million other things that produce quantities of jobs.

You can't compare what really rich people do with their money with what you or I do with it.

The biggest problem with being rich is figuring out what to do with that money. Burying it in mayonaise jars in the back yard is not an option, it has to work, its an obssesive compulsion thing.

[m_h_lovecraft]

3. So, again I wonder

If there is a critical mass of wealth, a point at which raising or cutting taxes is of nominal impact, where is the evidence that the ultra-wealthy wake up one morning after a tax cut, refreshed and ready to spend some dough (investing in production lines, R&D, etc.)? The scandalous CEO pays of the last decade or so for instance -- no evidence that they invested in the development of the companies that helmed at all. Buying stock after the IPO does not put any money into the corporate coffers, merely shuffles the ownership deck. Holding a stake in their notes is of some benefit, but there is rarely any open emphasis placed on buying debt as a true growth strategy.

[jagguy]

6. thats one thing that they do

but I will dispute that this happens as much as you would assume. I also dispute that there is a nominal impact. Might be chump change for you or I but it's hundreds of thousands for the very wealthy, perhaps more.

That is enough to make a difference.

[m_h_lovecraft]

10. Please elaborate

"this happens as much as you would assume"

I'm not sure I'm assuming anything, merely asking questions to draw out some debate. Care to elaborate? Because you're thoughts seem based upon a faith in the system, as opposed to evidence within the system. My point ultimately is how do we KNOW that tax cuts, wealth and economic stimulus are genuinely part of a functional system and not simply independent elements that have been rhetorically & theoretically correlated?

[jagguy]

13. what I do know about is what wealthy people I know do

and it's not all tossed to some offshore hidey hole. They re-invest and tend to do so fairly locally. They also pony up quite a bit for charity and the arts.

Now I'm sure that there are some who do the opposite but everyone can't be from the south.

Thats not some pie in the sky bull, this is real and its happening every day.

And its got a lot to do with why and how they GOT wealthy. Keeping it local builds relationships and thats the name of the game in this area.

[m_h_lovecraft]

14. Anecdotal evidence - Fair enough

Thanks!

[jagguy]

16. my pleasure

.

[Clete]

9. Excuse me.

Yachts don't provide a whole lot of jobs on the factory line. Toyotas and Fords do. The volume created by the working class if they have a little excess from their paychecks to buy a few things like a cheap family car is what keeps the factories operating and the economy humming.

[Cheswick2.0]

19. you are mistaken

People don't create jobs becaue they got a tax break. You could give them a billion and not one job would be created if there was no demand. Puting money in the hands of the middle class stimulates the economy and not taking jobs out of the country stimulates the economy.

[trotsky]

2. The whole supply-side nonsense...

is predicated on the belief that when the rich have more money, they will invest more, thus allowing the creation of new businesses, which need workers, who get a paycheck, and can buy stuff.

What this completely ignores is the fact that NO investor is going to put his/her money into something that makes a product for which there is no demand. (e.g., The current economy, where a large number of people are unemployed and those who do have jobs don't have the kind of disposable income they once did.)

It's chicken-and-egg stuff: which comes first, supply or demand? There's a good reason Bush Sr. called it "voodoo economics".

[mike6640]

5. Was listening to Robert Reich

on NPR interview. His Philosophy is

1)we are in a recession, decreased consumer base, laid off workers, underutilized production capacity.

2)tax breaks to wealthy will NOT be put into more investment in equipment (still standing there), new jobs (no demand for products) or spemding (they already spend what they want).

"Supply side" only works in an already energized economy, as a MODEL, not a stimulus technique.

[jagguy]

15. then why are they building so much commercial here ?

if the economy is so shitty then why are there two large new malls going up and dozens of other commercial properties and a new hospital ?

Many of the manufacturers are adding capacity as well.

Got to look past purely consumable products. And remember that America has not conceded all manufacture to foreign producers.

If you build it, they will come...

[trotsky]

18. They won't come if they don't have money.

First off, "the economy" is different in different parts of the country. Where you're at things may not be as bad. I don't think it's reasonable of you to generalize and think that just because they are building some malls in your neighborhood that everything is hunky-dory everywhere.

Second, many families do still have money. And they will likely spend "enough" to keep the economy slugging along at its current rate.

But without a lot more consumer spending (i.e., demand-side economics) you just won't have the kinds of returns that will profit investors and cause them to expand/re-invest.

[Cheswick2.0]

20. where's "here"?

What idiot is building a Mall. Quick, tell him mall shopping is dead.

[thermodynamic]

21. With the amount of "for rent" and "leasing available" signs...

it's wasteful and stupid to build a new building, and many of those available buildings are quite roomy. :eyes:

Also, Cheswick is correct in his statement. It's the non-wealthy who make up this economy, particularly the middle class. They need the relief and benefits. Not the wealthy.

We've had a son of a bush* in the WH for 3 years who has passed more than 1 big tax cut for the rich, saying the tax cuts will help better the economy. Now these ingenious tax cut ideas of his came from Reagan, and these tax cut ideas didn't work then either. In other words, the Wretched Little Man* has been OUTRIGHT LYING TO US FROM DAY 1. HE IS A LYING LIAR!

Bush* is giving America a grade-A1 snow job and how the sheeple haven't managed to put 1+1 together by now just shows how dumbed down America is. :-(

[bemildred]

4. They are economic parasites.

Doesn't mean they are all bad people, but it is
bullshit that they earn their way ...

[sirshack]

7. I don't think you're going to find a good answer....

Net income is not a sole determining factor of wealth. You could have a net income of $100k a year, but own three rental properties. You could have a net income of $50k a year, and own three or four acres of land. Wealth is not just income or wages. It's entirely plausible that I could take you to a nice, multi-million dollar house with a BMW in the driveway, and then note that the person who lives there just filed for bankruptcy....

[m_h_lovecraft]

8. So far all good answers

I'm just trying to get a feel for others' economic views. It helps me because I'm somewhat on the low side of econ book larnin' and I appreciate and welcome the thoughts.

[Nederland]

11. Simple Math

To wit, why is there an argument that tax cuts for the rich somehow stimulate the economy if their buying power was never diminished in the first place?


My first thought is that you need to understand that this statement is false. If you are currently taxing a person making 10 million a year at 30%, and you raise that rate to 40%, (all other things being equal) you have diminished their buying power by exactly 1 million dollars. This is not debatable, it is simple math. Now, you could say that their buying power has not been "significantly" diminished, and you could say that they still have enough money to buy whatever the want, but you can't say their buying power hasn't been diminished. It has.

The real question is what rich people do with their money. I think we can all agree that they do not hide under their mattresses (at least, I hope no one here is stupid enough to believe that). Obviously then, they are doing one of two things with their money: they are spending it or they are investing it. Now whether or not you believe that is good or bad for the economy depends entirely on what you believe is "good" and what a particular rich person is doing. I think we can all agree that if the rich person in question is using their money to fly to Thailand and have sex with 12 year old girls, this is a "bad" thing that does not help our economy one wit (except for the purchase of a presumably first class airpline ticket out of the country). On the other hand, if the rich person in question is using their money to remodel their house using only materials made in union controlled US factories and union member laborers it is a "good" thing.

Obviously, neither of these examples represent reality. We simply do not know for certain because its hard to quantify without real comprehensive data on how rich people spend their money. So in the end, its a gut choice on your part. Who do you think will spend X number of dollars in a way that will stimulate the economy the most: the government, or your average rich guy. I have to say, when I look at the billions of dollars that get wasted every year on defense and the war on drugs, I have my doubts. It would be nice if I knew for a fact that any tax increases were spent only on programs that I personally approve of, but then we wouldn't be living in a democracy, we would be living in the Dictatorship of Nederland. Which, I must say, would totally rock. For me at least :).

[m_h_lovecraft]

12. I cheerfully stand corrected

Yes, my bad -- simple math re: diminished buying power. I was attempting to get at the idea that the ultra-wealthy, unlike us, probably don't look at their checkbook and think "gosh, can't afford to buy that until I get a tax cut."

[classics]

17. Almost nothing.

Most will choose to live outside the US, or at least have many homes to choose from outside the US.

Where a poor person will spend 100% of their income in the US on food and housing, a wealthy person of the class you described will spend less than 5% on these items.

Sure they have 'buying power' but the wealthy dont live paycheck to paycheck, spending every dollar just to stay afloat. Their money is saved or 'invested', which essentially takes it out of the economy.

Now I'm going to get flamed for saying investments take money out of the economy, but lets not pretend rich people are patriots, investing all their dollars in US companies.

The majority of their savings is going to be in very high yield accounts outside the US. What they do invest in here will most likely be large corporate investments, which may or may not actually contribute anything to the US economy.

Since corporations are busy raping and pillaging the US economy, sending every job to India and funneling profits out of the country, its hard to keep saying that investments in corporate stocks is a direct help to the US economy.

Then in the end, since capitalism seeks only to further concentrate wealth in the hands of the wealthy, any money they do invest just draws more resources out of our economy into their savings.

And remember, when things get bad and the shit really hits the fan. Whos going to be left holding the bag? Not Kenny Boy or GW, thats for sure.

When the wealthy corporate elite are done raping this countries economy and nothing is left but a war zone of people killing each other for food, they will not be going down with the ship.

Like the parasites they are, they will just sail across the sea on a raft of money, probably to China this time, to start raping again.