Wednesday, August 19, 2009

Why America Needs "The Rich"

Let's look at what the rich do for the economy. They're overwhelmingly the investors and entrepreneurs that start new businesses. These activities make the rich the economy's leading employers, providing millions of jobs and the payroll that goes with them.

The rich are big spenders, contributing a large share to the consumer demand that keeps the economy percolating. Every dollar they spend becomes income to somebody else.
From telephones and cars generations ago to cell phones and plasma TVs more recently, the rich are also the early adopters of new technologies. They encourage innovation by paying the high prices that cover producers' startup costs. Their money lets companies expand output, driving prices down for middle-class consumers.

Obama can expand the ranks of the rich by choosing policies that encourage honesty over fraud in business, work over entitlement in consumption, productive risk taking over speculation, freer trade over protectionism, and economic dynamism over saving jobs and industries.

The goals should be more entrepreneurs, more investors, more innovation and more of what economist Joseph Schumpeter called "creative destruction." In short, Obama needs policies that expand the economic pie, increase tax revenues and tame the deficit monster: lower taxes, less regulation and smaller government to energize the economy.

~W. Michael Cox editorial in yesterday's IBD

Originally posted at Carpe Diem.

15 Comments:

At 8/19/2009 8:19 AM, Blogger Marcus said...

The first paragraph is an important reason why we need rich people. In fact, many of the rich are rich because they are better investors. They are better at productively allocating resources.

The second paragraph, however, does not describe a reason we need rich people. If the government transfers money from the rich to the poor, the poor will still spend it. But, you'll end up with less investment too, which is why we need rich people which takes us back to paragraph one.

Arguably, the second paragraph is a reason we don't need rich people. It could be argued that rich people distort the market by buying their big screen TV's and their BMW's. They cause what might otherwise be productive resources to be redirected into these unproductive uses.

Just a thought.

 
At 8/19/2009 9:02 AM, Blogger JimJinNJ said...

Marcus--
It occurs to me that the "unproductive uses" such as big screen TV's, BMW's are the tip of the econ iceberg.
the guys engineering, assembling, servicing don't look at BMW's as "unproductive."

Please look a bit bigger picture. In this case, the entire value chain from mining ore or purifying silicon through to recycling the product for the next generation. the economy is a large, complex, interdependent system and value is (usually) added in many directions.

 
At 8/19/2009 12:06 PM, Blogger sethstorm said...

The problem is that the idea gets confused with giving them a divine mandate. They need us as much as we need them, yet it seems that it never visibly or clearly goes in the other direction for US citizens.

They get a divine mandate to click and ship work to unstable/despotic nations, we get junk from Chinese/Latin American/Subcontinental/East European thugs. They're happy to peddle their influences to make it a very slanted deal against fellow citizens; they ruin the reputation of the few honest folks who just happen to have the money.

As for looking at the invisible and amorphous as a justification, that (no pun intended) does not make the argument any more clear. Indirection in this case only says 'evasion' and dishonesty.

 
At 8/19/2009 12:47 PM, Blogger sethstorm said...

Further, the author of the article presumes that the skill shortages actually exist. He fails to acknowledge the cooked up shortages courtesy of various law firms and foreign lobbyists that are on the receiving end of those who click-and-ship away from the US. The actual education shortages are made worse by bypassing US citizens any way possible(financial, rigging admittance tests to particular people, affirmative action, etc.).

Less divine mandate to bypass citizens, more mutual trust to rebuild this nation.

 
At 8/19/2009 1:51 PM, Anonymous Anonymous said...

America needs the highly productive across the whole spectrum of the economy. Let's not tax the people that make higher salaries and accumulate wealth any higher then the upper meddle-class. Let's tax the progeny who inherit great wealth or don't work in small and medium size businesses that are inherited.

Almost every rich kid I knew "retired" very early becuase of inheritence and communted to other homes and boats ss their occupation. Their investible funds dissapitated fairly quickly due to life-style enhancements.

Don't over-tax the productive, don't subsidise the temporatily unemployed very much; stop subsidising absent fathers and mothers; limit non-taxed inheritences to small businesses and farms.

 
At 8/19/2009 4:00 PM, Blogger 1 said...

"The problem is that the idea gets confused with giving them a divine mandate"...

LMAO! Who besides you is giving them this alledged 'divine mandate'?

"They need us as much as we need them, yet it seems that it never visibly or clearly goes in the other direction for US citizens"...

ROFLMAO!

These supposed rich you wail on about need 'us' like the Titanic needed more ice...

"They get a divine mandate to click and ship work to unstable/despotic nations, we get junk from Chinese/Latin American/Subcontinental/East European thugs"...

Oh my! It isn't insane corporate tax rates and asinine rulings from both the federal bench and the EPA that drives jobs overseas, right?

It couldn't be that! Nooooo! Of course not!

"They're happy to peddle their influences to make it a very slanted deal against fellow citizens"...

And YOU are more than happy to steal their wealth via the machinations of the Congress and the federal government....

Thanks again sethstorm for reminding me again this country is in trouble...

 
At 8/19/2009 4:24 PM, Anonymous Benny The Real Free Marketeer said...

I volunteer to be rich, if America really needs it.

 
At 8/19/2009 6:16 PM, Anonymous Anonymous said...

Unfortunately, Benny, it usually takes more than willingness to become rich. It usually takes hard work, good personal finance and years of spending less than you make.

The good news is nearly anybody can do it.

 
At 8/19/2009 7:31 PM, Anonymous Anonymous said...

Benny, you could have also picked the correct income level parents but it's to late now.

 
At 8/20/2009 9:14 AM, Blogger sethstorm said...


1 said...

Nice way to dodge the issue.


...their wealth via the machinations of the Congress and the federal government....

Accusations pointed towards my direction aside, they have done that very same thing. The results have been a loss of trust in such people.

They are not to be treated as the divine, where it is an act of obstinacy to question them and to hold back any vengeance against the questioner.


Oh my! It isn't insane corporate tax rates and asinine rulings from both the federal bench and the EPA that drives jobs overseas, right?

Never mind the unaccountable foreign interests that make such evasions a less than honest practice. That kind of practice could not survive without those foreign interests.

 
At 8/20/2009 9:16 AM, Blogger sethstorm said...



Accusations pointed towards my direction aside, they have done that very same thing. The results have been a loss of trust in such people.

They are not to be treated as the divine, where it is an act of obstinacy to question them and to hold back any vengeance against the questioner.

To clarify, it isn't Congress I'm talking about, it is business interests that wish to dishonestly click-and-ship to despotic/unstable lands.

 
At 8/20/2009 4:28 PM, Blogger 1 said...

Talk about dodging the issue sethstorm, you've yet to back up anything you've been claiming with something credible, this particularly bizzare statement being a great example: "Never mind the unaccountable foreign interests that make such evasions a less than honest practice"...

 
At 8/21/2009 1:43 AM, Blogger sethstorm said...

1 said... @ 8/20/2009 4:28 PM
I'm referring to those foreign interests that get to help write laws and regulations as a courtesy of the lobbying process.

That is a straight-on answer for the issue. The rest of it is affected by you introducing bias in that I could never bring a good enough source to you (never mind you not bringing any source to the table whatsoever on the issue).

 
At 8/21/2009 5:59 PM, Blogger 1 said...

"I'm referring to those foreign interests that get to help write laws and regulations as a courtesy of the lobbying process"...

Got something credible to back that statement up sethstorm?

 
At 9/24/2009 11:55 AM, Blogger growinggrass said...

Well that's stupid. As Marcus stated, if the rich weren't rich, that money would be more widely distributed and would still be spent. Furthermore, MORE of it would be spent and circulating in the economy because middle class folks spend a larger chunk of their income than the rich do, while the rich keep a lot of money sitting in banks. Afterall, there's you can only have the desire to spend so much of your tens/hundreds of millions. If somebody making $50k/yr suddenly makes $100k/yr they quickly start spending more because there's a lot that they want but can't afford - a house, a better car, maybe some decent healthcare, etc. If somebody making $50M/yr. starts making $100M/yr. do their spending habits really change much? No. I'm sure the author of the article has enough sense to realize that, but since the publication is directed toward the rich there's some bias there, isn't there?

 

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