It’s rare to find reason to praise Newsweek Magazine. But in the July 20 issue, they revealed a little something about the high cost of taking too much from the rich.
Quote: “Trickle-down economics is a despised phrase and concept to many, but it also embodies a harsh reality.” (Note the word: reality.) Continuing: “The rich often play a pivotal role in U.S. economic growth, and if they are enfeebled, then the consequences are widespread.”
The trouble with slowing the engine of the train is that the caboose slows down too; it doesn’t get anywhere faster. The problem with Obama’s plan to send all the bills for his every scheme to the rich is all the collateral damage.
Summarizing from the Newsweek article:
Households with more than $200,000 in income corral only 3.4 percent of all income but do 14 percent of the consumer spending, the only real force that creates and sustains jobs. What I’d point out is, if put upon, it is infinitely easier for us rich folks to cut back our spending by half than it is for low income earners to cut their spending at all. The lower on the income ladder, the higher the percentage of income is spent on necessities. The higher the income, the more discretionary spending and flexible spending choices. If the $200,000+ earners cut their spending by half, and contribute only 7 percent of all consumer spending instead of 14 percent, what then? Well, yes we can. And don’t kid yourself, we already are.
Next from Newsweek: the rich also pay most of the taxes. In 2006 – the last year for which complete data is accessible – the richest 1 percent paid 28 percent of all federal taxes, the richest 10 percent paid 55 percent. Might I point out, should the rich decide they are being ruthlessly and unjustly targeted and take twice as much time off and cut their incomes intentionally by 10 percent or 20 percent for a few years, the federal government will find itself starved of incoming tax revenue. As a result, tax increases on everybody else – notably the middle class, who have no such choices – will multiply fast and furiously.
And I assure you hundreds and hundreds of high 6-figure and 7-figure earners intend doing exactly that. I have close consultative relationships with them, and I know that in both their strategic business plans and personal goals they will deliberately cut back. They’ll take on less responsibility, invest less, delay new store openings or other expansions. They may take extra time off or even complete sabbaticals. They’ll reduce their incomes and just coast until they no longer feel Obama’s crosshairs on them. The more taxes he aims at us, the less tax revenue he’ll get, which will send him to your middle class door.
Next from Newsweek: the wealthy dominate charitable giving. The top 10 percent in income and wealth account for nearly 50 percent of all contributions to charities. Oh, and by the way, if you’d like to see a big jump in health care costs, get rich people to stop building hospital wings and donating to research groups.
And if that top 10 percent just cut back on their charitable giving a little, I wonder how many jobs disappear from the non-profit sector? How many food banks and theaters and zoos and community centers and what-have-you’s will have to cut back services and programs? Shuttle buses for seniors stop, food deliveries to shut-ins stop, free medical clinics shutter.
Finally from Newsweek: wealthy individuals are an important source of venture capital – funds invested in start-up companies. I would mention that a robust start-up of new businesses is essential just to replace the dying out of antiquated industrial businesses, the outsourcing of jobs overseas, the closing of business starved for capital and financing; just to stay even. If we evil rich stop putting our money at risk, even for a little while, the total number of available jobs shrinks and shrinks and shrinks.
Oh, and yes we can. Yes we can. Yes we can.
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