Thursday, December 1, 2011

Multi-Billionaire Fat Cat Eviserates (All?) Republican Economic Policies

Imagine you're a multi-billionaire fat cat venture capitalist - what would your view of economics, taxes, supply, and demand be?

In an absolutely amazing op-ed in Bloomberg (you really should go read the whole thing), the fabulously wealthy Nick Hanauer explains that his marginal propensity to consume is probably smaller than mine, why the super-rich should be taxed at extremely high rates (in order to reward real job creators), and why the vast majority of people should earn way more than they do. According to this multi-billionaire venture capitalist, the real job creators are middle-class consumers, not the rich:
Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.
One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.
It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA (AM)), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.
I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.
If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.
There you have it - basic economics and sound (progressive) economic prescriptions, from the mouth of someone who would face dramatically higher taxes if we governed according to his principles, and yes, the economy would be in far better shape if the middle and lower classes had substantially more money to spend than they currently do.

Just how much have the rich taken, while the rest of America gets left behind? It's an ugly picture:

As Kevin Drum says: "We need entrepreneurs, but we need a thriving middle class even more. Washington DC's centrist punditocracy needs to have this pounded into their skulls." And like it or not, even fat cat venture capitalists admit that a key component to a thriving middle class is a very high top marginal tax rate.

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