Thursday, April 12, 2007

The Rich Are Where The Money Is

The New York Times has an article entitled "In the Real World of Work and Wages, Trickle-Down Theories Don't Hold Up". If you just ate some poorly prepared blowfish and don't have any syrup of ipecac handy, read it. Yeah, it's that bad. Let's start at the beginning:

After an intriguing title, the author decides to introduce the reader to the real point of the article (a point completely different than the one implied in the title) - how we should implement a universal health care system. It's quite simple really: a universal health care system will cost a lot of money. Well, then, we just have to think as Willie Sutton did when he allegedly said "[I rob banks] because that's where the money is." The rich in this country are where the money is, therefore, we should tax them!

I quote: "In short, top earners are where the money is. Universal health coverage cannot happen unless they pay higher taxes."

Oh, but the author is aware that there are many opponents of this idea, many of whom point to the fact that taxing the rich (or businesses, etc.) will have a trickle down effect on the economy. Thus, for the rest of the article, the author tries to destroy the "Trickle-Down Theory" in an effort to justify taxing the rich to pay for everyone else's health care.

Now, first of all, notice that the author takes it for granted that there should be universal health care in this country. Now, I will grant him that he should not have to address every last facet of every argument leading up to his point - I just want you to notice that he takes it for granted.

Secondly, the Trickle-Down Theory is not the only argument against taxing the rich to pay for something from which everyone will benefit (there is an argument from justice, for instance), so, even if the author succeeds in his argument, he is far from justifying the project.

Ah, now we get to the straw man of the article: "Trickle-down theorists are quick to object that higher taxes would cause top earners to work less and take fewer risks, thereby stifling economic growth." In fact, while that certainly is a consideration, its more of a considerations with other issues, say Sarbanes-Oxley, for example. The real thrust of the Trickle-Down Theory's argument against taxing the rich and giving to the not rich (not just the poor) is that, with less money, the top earners in the country will invest less which will have a drag effect on the economy. Even though the money "still exists", it exists in the hands of the government, which never puts it to as productive a use as capital investing does.

What trickles down is less capital to loan to non-rich people and business to facilitate growth and less consumption by the rich of goods and/or services produced by non-rich persons. The trickle down that might be caused by top earners working less hours certainly would be a concern if it were a reality, but, as the author takes pains to prove, is not.

Next, there's a nice bait and switch for the rich:

"In the United States, trickle-down theory’s insistence that a more progressive tax structure would compromise economic growth has long blocked attempts to provide valued public services."
"Low- and middle-income families are not the only ones who have been harmed by our inability to provide valued public services. For example, rich and poor alike would benefit from an expansion of the Energy Department’s program to secure stockpiles of nuclear materials that remain poorly guarded in the former Soviet Union. Instead, the Bush administration has cut this program, even as terrorists actively seek to acquire nuclear weaponry."
So, in other words, because there are such things as public works that benefit everyone equally, namely, national defense and non-proliferation efforts, the rich should not care that this particular public work is essentially stealing from one group to give to the other.

Finally, we get the glorious conclusion to the author's argument:
"The rich are where the money is. Many top earners would willingly pay higher taxes for public services that promise high value. Yet trickle-down theory, which is supported neither by theory nor evidence, continues to stand in the way. This theory is ripe for abandonment."
Again, the argument about how the rich should willing pay for something of great value - to someone other than themselves. Also, once again, the idea that what the author has addressed is actually the trickle down theory and that the collapse of that particular objection would mean clear sailing for universal health care.



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