Thursday, January 01, 2009

Top Earners Are the Vital, Economic Activists

It’s not Obama’s middle-class tax cut that’s going to get us out of this economic jam. At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery.

Social historian and early supply-side activist Irving Kristol taught us three decades ago that the top earners are the economic activists. They’re the ones with the highest propensity to consume and invest. They’re the ones who buy the yachts, which are built by blue-collar workers. And they’re the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism.

If we had an economy without rich people we wouldn’t have much of an economy. That’s why lower tax rates to reward the economic activists — the most prominent capitalists — are so essential.

~Larry Kudlow

MP: The economic activists who energize the economy also pay most of our income taxes: the top 1% pay about 40% of all income taxes paid, the top 10% pay about 71%, and the top 25% pay more than 86% (2006 data here).


At 1/01/2009 9:18 PM, Anonymous Anonymous said...

I hear no one - no one anywhere on the entire political continuum - saying that we should not have wealthy people. Certainly, they are an important and necessary part of the whole free enterprise equation. They are also good role models who motivate the rest of us to dream and work hard.

A strong, viable middle class is also very important and has been germane to the success of the American republic.

Its when one observes more and more of the nation's wealth being concentrated at the top end along with a shrinking middle class, that people get nervous and worry for future stability of the country.

At 1/01/2009 10:22 PM, Blogger OBloodyHell said...

> Its when one observes more and more of the nation's wealth being concentrated at the top end along with a shrinking middle class, that people get nervous and worry for future stability of the country.

If that were actually observed, it might make sense to debate you.

Since that's not what's observed, that, in fact, the whole boat is drifting steadily upward to the point where even the "impoverished" in the USA have cable TV, cell phones, and often wear $200 sneakers, your claim is spurious and of zero truth value.

And since even a casual perusal of the postings on CD in the last six months points out that the "middle class" is hardly shrinking, despite endless blathering to that effect by the media, your obvious sole source of "information" (aka, "disinformation", in all rational circles), you mark yourself as tremendously ignorant to prattle on with the claim.

Prediction: Once Obama takes office, this claim of a "shrinking middle class" will magically disappear, and followup stories by the media will hail Obama as the "savior of the middle class".

All the numbers will be the same -- the statistics will not have changed in the least -- only the reporting will be different.

At 1/02/2009 1:27 AM, Anonymous Anonymous said...

It is an interesting property of capitalism. Deng Xiao Ping, the Chinese free market leader said that: 'When we implement a capitalist free market economy in China we will have to ALLOW some people to become very rich'.
The corollary of this property is that if one tries to prevent the phenomena from happening, everyone gets poor.

At 1/02/2009 4:49 PM, Blogger QT said...


Contrary to the endless assertions by politicians and political pundits, the middle class is not disappearing. Terry Fitzgerald from the Federal Reserve Bank of Mineapolis offers a good analysis of this issue that helps to put some of this information in perspective. Additional detail available here.

The problem with many of these discussions is that they reflect the increasing politicization of many economic and social issues.

For a non-partisan view of many economic issues, you might enjoy "Spin Free Economics" by Narimen Behravesh. It presents a comprehensive analysis of major economic ideas, including where economists agree/disagree and what public policy approaches have been tried.

At 1/03/2009 12:12 AM, Anonymous Anonymous said...

Thank you, QT. I reviewed the articles to which you referred me and found them interesting. I also, did some further research on the topic from several resources.

As is usually the case, we find there are two schools of thought on this issue of whether the middle class is shrinking or not. (Please note I never used the word "disappearing".) There are credible and authoritative scholars - with statistics - on both sides of the issue.

For just one example, even Wikepedi, which some here can be expected to dismiss, states that: "The majority of social scientists believe that income inequality currently poses a problem for American society with Alan Greenspan stating it to be a "very disturbing trend." (Recall Alan is not of the media)

I know that over the last fifteen years or so, I and co-workers in all job classifications at my workplace had annual wage increases of 2% or less, while the CPI went up three to five percent most of those years. Ergo, a loss of purchasing power.

I noticed that one of your sources included the cost of fringe benefits as a significant component of annual income. The skyrocketing cost of health insurance (Ha - somebody here will probably say that's a myth too!) would unfairly inflate increases of income as reported therein.

But thank you, I continue to learn from contributors to this blog.

At 1/03/2009 12:32 PM, Blogger K T Cat said...

Not so long ago, Larry Kudlow was claiming we were in the middle of a Goldilocks economy. He's probably not the best person to be quoting right now. He's the right wing version of Paul Krugman.

At 1/03/2009 9:24 PM, Anonymous Anonymous said...

I was wondering if you can explain how Warren Buffett's Secretary pays a higher percentage in taxes then Warren Buffet. Buffett is a Billionaire and also makes much more then his Secretary.

At 1/03/2009 9:30 PM, Anonymous Anonymous said...

Kudlow is a hopeless RepubliKKKan shill, and as such, his economic advice is as sage as Dick Cheney or Karl Rove. I don't care what his bio or the New York Times says he is delusional and absolutely useless as a reliable source of information.
I remember following him when he was chief economist for Bear Stearns in the 80s until he was fired for being wrong most of the time.

At 1/03/2009 11:02 PM, Anonymous Anonymous said...

I've known some wealthy slumlords but never considered them good role models!

At 1/03/2009 11:10 PM, Anonymous Anonymous said...

Cite, please!

Show me a poor person wearing $200 shoes.

I wear $11 Walmart shoes (to think they were only $9.97 a year ago!).

Oh thanks for reminding me...I gotta go to Walmart tomorrow to pick up some $2 (or whatever they cost now) socks. My last pair has attained holeyness.

At 1/03/2009 11:32 PM, Anonymous Anonymous said...

t jefferson:

Approx 98 percent (give or take appeox one percent) of Warren Buffett's income comes from dividends and/or capital gains.

Dividends and capital gains are preferentially taxes at 15 percent for the vast majority of taxpayers. (For taxpayers in the lowest tax brackets, dividends and capital gains are taxed at 10 percent.)

Wage and salaries are taxes as "ordinary income" at marginal rates typically 28 percent or higher for middle and upper income employees.

We don't know the income or effective tax rate of Buffett's secretary, but he does, and also it's plausible to presume that most of her income is taxes at 28 percent or more.

At 1/04/2009 1:53 PM, Anonymous Anonymous said...

poor boomer
Buffett was taxed 17.7% on the $46 million salary.


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