In the good old days one of the most enviable of jobs was that of a commentator or writer whose responsibility it was to explain to us in the mass audience why rich people are so necessary to maintaining a strong economy.
On a normal Monday morning they began their work day by issuing ready-made pronouncements that disposed of any proposal that might have resulted in even the slightest reduction in wealth for anyone who is rich.
Over coffee and donuts they simply conjured up images of economic catastrophe sure to befall us if we were to entertain any proposal that makes rich people a little less wealthy. All they had to do was remind us that if the rich don’t get richer the rest of us will be left jobless or homeless and Wall Street will cease laying the golden eggs that keep us happy.
These are no longer the good old days, however.
When a judge sentenced Bernard Madoff, the billionaire con-artist, to 150 years in prison the other day the people in the courtroom rose to their feet in prolonged applause.
Given this new atmosphere, what’s a pundit who extols the virtues of the rich to do? It’s just not easy anymore.
What can they threaten us with now that the economy has already completely collapsed?
These pundits now find themselves faced with having to struggle to come up with the apologies for the rich that used to come so easily.
Unfortunately, for them, some of their arguments don’t meet the minimum standards to qualify as logic.
One of these arguments appeared last month in the Wall Street Journal. Millionaires in Maryland, the article claimed, are being turned into “refugees.” Ill-advised tax hikes on the rich in that state, the paper said, have led to a mass exodus of wealthy people and have endangered economic recovery.
The paper claimed the tax hikes have caused a third of the state’s millionaires to flee the state, proving, once again, the “futility” of “soaking the rich.”
Describing the millionaires as “fleeced taxpayers,” the editorial said of them: “They decided to fight back. They left the state.”
The “soaking” the Wall Street Journal referred to was a decision by Maryland in 2008 to raise the top state tax rate on incomes over $1 million to 6.25 percent from its prior level of 4.75 percent.
Nowhere in the editorial did the Wall Street Journal cite any credible evidence for the “flood” of millionaires escaping cruel taxation in Maryland. The article simply said there were one-third fewer millionaires on the state’s tax rolls.
What really happened in Maryland was that a lot less people earned over $1 million in 2008. As Wall Street crashed, wealthy people in Maryland took a big hit. Many reported incomes below $1 million for the first time in many years.
If anything, what happened in Maryland proves that it is the rich who need the working people, not the other way around. By killing the middle class and by wiping out jobs, the rich, themselves, will eventually suffer. If there’s a hole in the bottom of the boat it’s only a matter of time before the people on the upper decks go under the water.
Another group of pundits who apologize for the rich is trying to defend CEOs who have come under attack for the outrageous pay packages they receive. Some have even proposed that CEOs are not really being over-compensated and that, if anything, higher pay for them is the way we should go.
This is what University of Chicago economist Steve Kaplan said last week in the Harvard Business Review. “The evidence,” Kaplan said, “indicates that CEOs typically aren’t overpaid.”
Paychecks for top-level CEOs, it seems, aren’t rising as fast as paychecks for top hedge fund managers and other financial kingpins. In 2007, Kaplan says, the hedge fund industry’s top 20 earned over $20 billion, triple the meager $7.5 billion combined income of the nation’s top 500 CEOs.
What, exactly, is this supposed to mean to an average worker? CEOs earn $10,000 more, on average, in a day than a worker earns in a year. Are we supposed to feel sorry for the “underpaid” CEOs? Kaplan ignores the gap in compensation for workers and CEOs because mentioning it would destroy his argument that CEOs deserve better pay.
The Harvard Business Review, then, is reduced to printing articles by pundits whose arguments run into logical dead ends. No amount of stretching, pulling and pushing can salvage their reasoning.
If not worthy of prizes for the precision of their logic, some of these pundits do deserve rewards for creativity, however.
Deserving of such awards are the economists Cameron Smith and Douglas Holtz-Eakin, both of whom have crafted incredible arguments against estate taxes paid by the very wealthy. (These taxes apply to individuals earning over $3.5 million or couples earning over $7 million.)
They argue in a recent report by the American Family Business Foundation that taxing the estates of the super wealthy “discourages” the rich from saving or investing their money. Estate taxes, they say, encourage the rich and famous to “waste” their money on things like cruises and expensive dinners. They are “forced” into this conspicuous consumption because it is the only way they can avoid unjust estate taxes.
So, now you know the truth. If you are unemployed it is because cruise ships and restaurants are getting the money that the super-rich would, were it not for estate taxes, otherwise be happily spending to create jobs.
When you cash your next unemployment check consider making a donation to the American Family Business Foundation, which will spend the money campaigning to roll back unfair taxes on the rich. In the end, you will benefit. They promise.
jwojcik @ pww.org