"Tax The Rich" And The Rhetoric-Policy Disconnect

Paul Krugman gives us a laugh by returning to one of his favorite themes - there are too many super-rich in Princeton, err, the US, and worse, no one even knows it!

... these days it’s the rich who are invisible.

But wait — isn’t half our TV programming devoted to breathless portrayal of the real or imagined lifestyles of the rich and fatuous? Yes, but that’s celebrity culture, and it doesn’t mean that the public has a good sense either of who the rich are or of how much money they make. In fact, most Americans have no idea just how unequal our society has become.

...

Is this just a reflection of the innumeracy of hoi polloi? No — the supposedly well informed often seem comparably out of touch. Until the Occupy movement turned the “1 percent” into a catchphrase, it was all too common to hear prominent pundits and politicians speak about inequality as if it were mainly about college graduates versus the less educated, or the top fifth of the population versus the bottom 80 percent.

And even the 1 percent is too broad a category; the really big gains have gone to an even tinier elite. For example, recent estimates indicate not only that the wealth of the top percent has surged relative to everyone else — rising from 25 percent of total wealth in 1973 to 40 percent now — but that the great bulk of that rise has taken place among the top 0.1 percent, the richest one-thousandth of Americans.

So how can people be unaware of this development, or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds.

The exceptions are celebrities, who live their lives in public. And defenses of extreme inequality almost always invoke the examples of movie and sports stars. But celebrities make up only a tiny fraction of the wealthy, and even the biggest stars earn far less than the financial barons who really dominate the upper strata. For example, according to Forbes, Robert Downey Jr. is the highest-paid actor in America, making $75 million last year. According to the same publication, in 2013 the top 25 hedge fund managers took home, on average, almost a billion dollars each.

Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate.

Even accepting all that at face value, the disconnect occurs once we switch to policy prescriptions. Krugman links to a poll showing Democrats favor more taxes on "the rich", which of course could have been any poll in my lifetime. But as an example, on one of his recent trips around this track Obama's proposed tax on "the rich" kicked in on couples roughly $250,000 per year and included a "Buffet Rule" bracket for those earning over $1 million per year. If Obama is promoting that as "the rich", can Krugman really blame people for thinking that at $75 mil per annum Robert Downey Jr. must be among the super-rich?

And would it surprise Krugman to learn that by now people assume that after he is done fulminating about mega-billionaires he will eventually back tax hikes on those far down the wealth ladder? Obama proposed reducing the estate tax exemption from $5 million to $3.5 million. I am sure that would raise some money, but is Krugman really writing about those pesky folks with $4 million in the bank, or tied up in their small business, or family farm?

The only semi-serious proposal to come from the left side of the aisle involves tinkering with the carried interest rule that allows hedge fund managers to be taxed on their fees at the capital gains rate rather than the rate normally applied to employment income. But as the estimable Peter Orszag explained in a 2007 CBO report now lost to the intertubes, some fairly banal restructuring would allow hedge fund operators to move towards that same capital-gains result while relying on conventional partnership taxation.

As the billionaires battle it out in pursuit of the best Congress money can buy, I will remark on a story I naturally can't find just now. In coverage of big donors to both parties it mentioned some chap worth a mere billion, and then Sheldon Adelson, worth about $40 billion. Adelson had donated roughly $100 million to various candidates and PACs in one year, which left me thinking - imagine being a billionaire and feeling utterly out-gunned when it comes to buying political influence. I don't think a billionaire will be giving away 10% of his fortune in one political year, but for Adelson $100 million is walking around money.

OK, I am not worried that our poor billionaire can't even get his phone calls returned. But it gives me pause.

Comments

[MarkO]

By Jove, I'm not rich enough. In fact, I'm not even rich. Yes. Send along some cash.

[lyle]

If you imagine Kruggie reading this aloud with a mouth full of balls marbles, it would make more sense.

[daddy]

Also of possible interest on that Jap Volcano that erupted a few days back and killed all those hikers---I did not realize that it was fairly close to the New Tokyo International Airport at Narita, the one all international flights generally use. I received this alert:

Mt. Ontake volcano in Japan erupted at approximately 0253 GMT on 27Sep14. Mt. Ontake is located 168 miles west of Narita Airport. The latest ash cloud forecast indicates that the ash cloud footprint could affect NRT operations as well as other flight operations.

...a volcano alert RED status may be implemented for the Narita airport. During RED status, operations to and from an affected airfield are restricted to a period of 1 hour after sunrise to 1 hour prior to sunset. Ash cloud models currently show the southern edge of the ash cloud outside of NRT operations.

Good to see that they were/are monitoring it. 168 miles may seem like a lot, but I recall that when Mt Spurr (90 Miles away from Anchorage) erupted in the early 1990's, the City was blanketed with about a half inch of pulverized black dust, and when Mt Redoubt (110 Miles away) erupted, it did not blanket the City but it's discharges interrupted normal air traffic for some weeks. This tragic Japanese eruption seems on a much smaller scale plume wise, but obviously had the potential to cause big problems.

[Thomas Collins]

I can think of one downside to having superrich .01 percenters. They tend to fund loony causes such as "sustainability", or they tend to leave gobs of money to foundations that often end up funding loony projects like the ones Krugman would support.

[henry]

Superrich must be one of those "don't knock it til you try it " things.

For the OH crowd a Dem candidate from Euclid I was pushing his book. At least he was until somebody noticed he called Republicans and Christians NAZIs... now his coauthor wrote it. (h/t a person in IL).

[daddy]

This Gateway Pundit link from the last thread Breaking: ISIS CLOSES IN ON BAGHDAD – Islamists ONE MILE From Iraqi Capital,

is scary in that IIRC, a huge conversion motivator in the early days of Muhammed and Islam, was that the lightening fast unexpected advances and victories of the small but rapidly growing Muslim Armies, was taken as a sign that God (Allah) truly was on their side.

Their history is replete with glorious memories of these victories, of destroying the huge armies of the Byzantines or whomever, and taking the major cities of Egypt and the Levant in unimaginable attacks against what were expected as very tough long shot odds.

The more we see headlines like the one above Breaking: ISIS CLOSES IN ON BAGHDAD – Islamists ONE MILE From Iraqi Capital the more people nutty enough to adhere to this religion will be swayed to believe that these SOB's are the true descendants of Muhammed's Islam, regardless what our nincompoop of a President, or John Kerry or David Cameron or the rest of the world blathers on about these guys being "Non-Islamic."

A few more of these miraculous victories, and ISIS is going to become the only brand of Islam that is truly Islam to a great majority of the Middle East and the Islamic World.

[neal]

My cup is overflowing, yet I live like a respectable hobo. Just passing through. Is that wrong?

A policy of messing with people that want to be left alone in order to mess with other people that just do the same thing does not seem prudent.

I mean, what the hell? If Paul smells blood in the water, here sir is your lifeboat. Educated serial killers probably should not teach.

[Old Lurker]

Jane is right I think. The government cannot do anything well (including disclosing plain facts when they occur).

Drudge:

"The man who jumped the White House fence this month and sprinted through the front door made it much farther into the building than previously known, overpowering one Secret Service officer and running through much of the main floor, according to three people familiar with the incident.

An alarm box near the front entrance of the White House designed to alert guards to an intruder had been muted at what officers believed was a request of the usher’s office, said a Secret Service official who spoke on the condition of anonymity.

The officer posted inside the front door appeared to be delayed in learning that the intruder, Omar Gonzalez, was about to burst through. Officers are trained that, upon learning of an intruder on the grounds, often through the alarm boxes posted around the property, they must immediately lock the front door.

After barreling past the guard immediately inside the door, Gonzalez, who was carrying a knife, dashed past the stairway leading a half-flight up to the first family’s living quarters. He then ran into the 80-foot-long East Room, an ornate space often used for receptions or presidential addresses."

[NKrebooting]

Jim Webb begins his VICE President campaign. He'll draw enough Isolationist votes from Fauxchahontas and HildaBeast names him VP-- that will be the deal. They'll be both 70 at the time? Big chance to hook in Millenials to the conservative cause in '16 with younger candidates.

[NKrebooting]

The Webb link: http://www.washingtonpost.com/politics/jim-webb-former-senator-from-va-takes-on-his-partys-hawks-and-maybe-clinton/2014/09/28/ba12f572-43f1-11e4-9a15-137aa0153527_story.html

[lyle]

Omar Gonzalez = Tea Partier

[Skoot]

Slow Joe said he'd follow ISIS to the gates of hell, not the gates of Baghdad! Those cunning bastards. Better take out more grain silos!

[Paul Zrimsek]

As Don Boudreaux (LUN) points out, it's just slightly difficult to square with Krugman's previous column, about how the rich are oscenely flaunting their wealth.

[Jim Miller]

It's odd, I think, that Krugman spends so much time on the few, the rich and the super rich, and so little time on the world's poor, the people who live on a dollar a day, or less.

In my own view, what happens to millions of, for example, Mexican peasants is more important than what happens to, for example, Carlos Slim.

Judging by his columns, Krgman's colleague, Kristof, agrees with me; judging by his columns, Krugman does not.

(Here's a small sample of my thoughts on the subject. Some of you may find it interesting.)

[Janet - the districts lie fallow, while the Capitol gorges itself]

Who cares if there are rich people? The Dems are salesmen of hate & coveting.

You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor.
— Exodus 20:17 (NIV)

No American, rich, middle class or poor, should have to pay MORE taxes.
It's throwing money down The Money Hole.
https://www.youtube.com/watch?v=JnX-D4kkPOQ

Pay more taxes so Planned Parenthood gets more money?...so our State Dept. buys art or fixes up some mosques?...to pass our money to some "green" grifters?

and what's this "WE" crap?
"...the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons."

[Old Lurker]

Have you SEEN my neighbor's wife?

[Extraneus]

As TM pointed out a few days ago, Krugman seems to covet his neighbors' houses.

[peter]

exactly right, Janet, Progs/envy mongerers always looking at the speck of dust in someone else's eye

[lyle]

No, OL. Pics?

[Janet - the districts lie fallow, while the Capitol gorges itself]

and it is none of the federal government's business what ANY of us have.
They should just be ensuring our freedoms & our national safety....getting some tax money for those core legitimate functions & THAT IS ALL.

All the DC losers & their minions seem to think their job is to come up with ways to get more of OUR money.

Planning ways to get more money while NOT EVEN DOING their legitimate functions!

[Extraneus]

Wacko Bird Ted Cruz:

ISIL Is Not a Reason to Cozy Up to Iran

On Sept. 26, 2012, an American pastor named Saeed Abedini who was visiting family and fellow Christians in Tehran was dragged out of the private home he was staying in and hauled away to jail by Iranian Revolutionary Guards. Friday marked the second anniversary of his imprisonment, and for the last two years he has been beaten, abused and subjected to solitary confinement for weeks on end in Iran’s most notoriously dangerous prisons for the crime of professing his Christian faith

...

Last week, just days from the second anniversary of Pastor Saeed’s incarceration, President Obama gave a major speech to the United Nations General Assembly. He focused on issues such as Ebola, ISIL militants in Iraq and the Russian invasion of Ukraine—all crises worthy of the attention of the American president and the United Nations. But entirely absent from his remarks was the grim threat posed to the United States and our allies by a nuclear-armed Iran.

In the very few words he devoted to the subject of Iran, President Obama offered the Iranians the “opportunity” to resolve the nuclear issue by "assuring the world" that their program is "peaceful.”

There was no mention of the many outright lies the Iranians have told about their program over the years.

There was no mention of Iran’s robust intercontinental ballistic missile program, the only purpose of which is to deliver a nuclear weapon.

There was no mention of Iran’s vast state sponsorship of terrorism.

There was no mention of the virulently hostile rhetoric routinely employed by Iranian officials about destroying what the Iranians call the “Great Satan” (America) and the "Little Satan” (Israel).

I'm glad he's apparently running for president. He may be defeated in the primaries, but people will hear what he has to say, unfiltered by idiots like McCain.

[Extraneus]

I don't how you guys see the new threads so fast.

I may never be first, but I think I've been last a few dozen times!

[Janet - the districts lie fallow, while the Capitol gorges itself]

or here's an idea. Why doesn't Krugman write a column nagging the "truly rich" to give their money away to the needy?
Why does everything have to go through the federal government?
Nag the rich, Paul. Do it. Tell them what exactly they should do with their money so you'll be satisfied. You seem to think you're a big expert.

You can hate the "truly rich" if you want, Paul...but quit trying to suck others into your envy & hatred.

[Threadkiller]

The truly rich are the public servants that retire early.

[Jim Eagle]

Jim Clapper, a new sort of "road kill".

[Captain Hate on the iPad]

Hadn't Jim Webb said that he was done with politics? Or was my perception of his words skewed by the gravitational force of that giant melon on his shoulders?

[Danube on iPad]

I kind of enjoy the thought of this small, dishonest man seething with envy and hekpless rage.

[Threadkiller]

LA pays millions as police and firefighter injury claims rise

http://www.latimes.com/local/cityhall/la-me-sworn-injury-leave-20140928-story.html

More rich people.

[narciso]

He has not yet stopped being a weasel, webb I mean

[Janet - the districts lie fallow, while the Capitol gorges itself]

:) Too funny, Captain!

If Webb & Kerry were the Dem. President & VP candidates...there wouldn't be enough room on the TV screen to even SEE the Republican candidates.

[Ignatz]

-- Or was my perception of his words skewed by the gravitational force of that giant melon on his shoulders?--

Sounds plausible to me. Probably why we both got a 68% on daddy's pop quiz.

[AliceH]

Wow. Two of the top 10 earning Hedge Fund guys - #1 George Soros ($4B) and #6 James Simons ($1.1B)are supposedly RETIRED Hedge Fund guys. Now, I admit that twist does make me just a tad envious.

[Danube on iPad]

Fabulous news: Charlie Weis fired at Kansas.

[Captain Hate]

Fat Boy Weis has made out like a bandit:

Under the terms of his contract, Kansas will owe Weis about $5.625 million, to be paid monthly thru Dec. 31, 2016.

According the Notre Dame's most recent tax return, Weis will be receiving payments from that school through December 2015.

He was paid nearly $2.1 million by Notre Dame during the 2012 calendar year, the most recent year for which figures are available.

Weis was paid the nearly $2.1 million by Notre Dame in 2010 and 2011. He received more than $6.6 million in pay and severance from the school in 2009.

The funniest story I ever heard about Chollie was when he was having his stomach stapled, something bad happened that they had to resuscitate him. Of course the fat slob sued the guys as if they were as bad at their job as he was at his. During the trial one of the jurors had a heart attack and the defendants rushed in and saved him, becoming instant heroes to the other jurors. Besides that he lost the case because he ignored the doctors' advice and had the operation done quickly rather than go through a six weed pre op program that surely called for him pushing away from the feeding trough.

[Captain Hate]

LOL Iggy.

[clarice]

Speaking of the rich:http://www.cato.org/blog/democrats-their-mansions-again?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Cato-at-liberty+%28Cato+at+Liberty%29