June 06, 2003

Moore books

So I finished another book, this time Michael Moore's "Downsize This!". Pretty soon I'm going to run out of liberal current-events books that I want to read, but for now, I still have about maybe a dozen left (including some 9/11 and Iraq compilations if I get really ambitious). Anyway, Moore's book was all right. Sounded a lot like James Carville's, actually.

Most of the book talks about Moore's problems with corporate downsizing. Not so much the ethics of downsizing itself, but the way it is viewed by society and the media. Moore also has a huge problem with the whole corporate ethic that their sole responsibility is to their shareholders, to earn as much profit as possible, etc. One of the hypotheticals he talks about is the cost of downsizing vs profits.

For example, suppose General Motors (GM) makes $7 billion in profit in a given year, but by closing a factory and putting 40% of a town's population out of work and moving the factory to Mexico, their profit can go up to $7.1 billion. Is it ethical for them to do this?

If yes, then why not let GM sell crack? It's a lot more profitable. But selling crack is illegal? Why? Because it tends to ruin people's lives. So why do we let corporations destroy communities for a small bump in the profits or the stock price? If profits mean everything, regardless of how much harm is caused to the community, then why not legalize crack? It's not a flawless argument, but it sounds pretty compelling to me.

I mean, I understand the whole Ayn Rand bit, that the people who own the companies are the ones who created the jobs and all the wonderful things that go with moving the economy. But in my opinion, that doesn't free them to do whatever the hell they want. The whole loyalty thing should go both ways. Companies don't exist in a theoretical moral vacuum.

Oh yeah, Moore also had a chapter on why he thinks OJ is innocent, but I'm not even close to being convinced.

Anyway, Michael Kinsley has a relevant entry on this topic recently:

Democracy presumes and enshrines equality. Capitalism not only presumes but requires and produces inequality. How can you have a society based on equality and inequality at the same time? The classic answer is that democracy and capitalism should reign in their own separate "spheres" (philosopher Michael Walzer's term). As citizens, we are all equal. As players in the economy, we enjoy differing rewards depending on our efforts, talents, or luck.

But how do you prevent power in one from leeching into the other? In various ways, we try to police the border. Capitalism is protected from democracy, to some extent, by provisions of the Constitution that guard individuals against tyranny of the majorityˇfor example, by forbidding the government to take your property without due process of law. Protecting democracy from capitalism is the noble intention, at least, of campaign finance laws that get enacted every couple of decades.

Separation of the spheres also depends on an unspoken deal, a nonaggression pact, between democracy's political majority and capitalism's affluent minority. The majority acknowledge that capitalism benefits all of us, even if some benefit a lot more than others. The majority also take comfort in the belief that everyone has at least a shot at scoring big. The affluent minority, meanwhile, acknowledge that their good fortune is at least in part the luck of the draw. They recognize that domestic tranquility, protection from foreign enemies, and other government functions are worth more to people with more at stake. And they retain a tiny yet prudent fear of what beast might be awakened if the fortunate folks get too greedy about protecting and enlarging their good fortune.

That was the deal. Under George W. Bush, though, the deal is breaking down. With Republicans in control of the White House and both Houses of Congress, the winners of the economic sphere are ratting on their side of the bargain and colonizing the sphere next door. Campaign contributions are only the crudest way power is transferred from the economic sphere to the political one. In addition, there are well-financed lobbying organizations, including some masquerading as research institutes. There is the inherent complexity and boredom of tax and regulatory issues, which repel people who don't have a major financial stake. There is the social milieu of the president and most members of Congress. They may not all come from the worlds of posh aristocracy or self-satisfied business success (Bush remarkably straddles both), but these are the worlds they are plunged into as they rise to congressional leadership. And, in the back of their minds, these are the worlds they may hope to find a place in when they lay down the weary burdens of power.

The recently enacted tax bill is such a shocking and brazen gift for the wealthy that it is hard to describe in anything short of these cartoon-Marxist terms. After two Bush tax cuts, consider how we now burden people at the bottom and at the top of the economic ladder.

A minimum-wage worker today must pay the FICA payroll tax of 15 percent (if you include the employer's share, as economists agree you should) on the very first dollar she earns. If she has children, she may qualify for an earned income tax credit, but she may not. If she works hard and moves up the income scale, she'll soon be paying another 15 percent in income tax. You might call this "double taxation," but President Bush doesn't.

Our minimum-wage worker most likely falls into one of the unadvertised holes in the Bush something-for-everyone tax cut. There is nothing in it for her. This gap around the minimum wage was supposedly inadvertent, and Republicans on Capitol Hill were eager to correct it. But Republican congressional straw boss Tom DeLay said incredibly that he would only allow the alleged correction as part of yet another big tax cut with more goodies for the serious income brackets.

Now look at the fellow who has a few millions or billions. He probably has paid no income tax on most of that pile, since investment profits are taxed only when they are "realized"ˇi.e., cashed in. Any investment profits that he hasn't cashed in when he cashes in himself escape the income tax forever. If he can hold on for a few years, under current plans, the estate tax will die before he does. His investment income also is exempt from the 15 percent FICA tax that hits the minimum-wage worker at dollar 1.

And now the tax rate on both dividends and capital gains is capped at 15 percent. This is supposed to alleviate the unfairness of having both a corporate income tax and a tax on the profits individuals earn on their investments in corporations. This is the one Bush does call "double taxation," and he rails against its injustice. In 2002 the total burden of the corporate income tax was barely one-fifth of the burden of payroll taxes, but it apparently strikes a more sensitive group of people.

So, under the American tax system as designed by the Bush administration and congressional Republicans, the most a person of vast wealth is expected to contribute to the commonweal from his or her last dollar of investment profits is the same 15 cents or so that a minimum-wage worker is expected to pay on his or her first dollar. This does not mean that we have a flat tax. We have a tax system of vast complexity, with wildly different tax burdens on different people. But we have a tax system that, on balance, knows who's in charge.

Moore and Kinsley are both saying similar things, that the people in power right now, whether at the corporate or government level, feel that they have a right to basically screw anyone they want for the benefit of the wealthy. After all, they reason, the wealthy are the ones who have created all the jobs and made this country great (in reality, they are the ones who contribute the most; obviously that's the most important thing). The real question is how long will everyone else put up with it, and how long will the corporate media keep reporting this like it's just business as usual?

Posted by Observer at June 6, 2003 07:18 AM
Comments

Comments on entries can only be made in pop-up windows while those entries are still on the main index page. Sorry for the inconvenience this causes, but this blocks about 99.99% of the spam the blog receives.

I am a General Motors shareholder.

I elect the board of directors. The board of directors chooses the officers. The officers run the day-to-day operations of the company. When a major decision like this is made, it usually involves the directors AND the shareholders.

So rather than blame GM, you should blame the shareholders for investing in a company that does this. I invest because 1) it is profitable for me, 2) they provide jobs, 3) they provide a valuable service to the world.

Frankly, if the directors I've elected don't do their job, I'll either vote to oust them or sell the stock, thus depressing its value. They have a fiduciary duty to me.

I think the blue-collar workers need to take some (if not most) responsibility for their plight. While they spend their free time drinking beer, eating large slabs of pork and watching minor-league hockey, there is a small minority of people out there reseaching how to save and invest their money and free themselves of the paycheck-to-paycheck rat race. When the "corporate axe" inevitably falls, whether a plant closure, mass layoff, or bankruptcy, this small well prepared group will survive. If fact, they'll probably thrive in the resulting mass foreclosures, fire sale of autos, etc.

It's all about instant gratification for most people who can't save enough money to weather the storms.

Would the world be better had GM never existed? They have made a lot of people wealthy, employee and shareholder alike. Think of all the small business that have sprung up to service GM products as well as the wealthy employees and shareholders.

Posted by: AC on June 6, 2003 09:28 AM

Actually, you as an individual shareholder have an extremely small amount of power. There is a relatively small group of maybe 100 individuals that manage the large mutual funds (Vanguard, Fidelity, etc.) who have a very large say in any vote that comes up before shareholders. These individuals are often trying to do what's best for their mutual fund (but sometimes, that involves deals that may not be best for a given fund that they manage, instead they are best for the company that owns the funds, etc).

They are definitely not looking out for the workers, necessarily. I think you greatly overestimate the importance of individual shareholders in the eyes of the company directors. You talk about responsibility, but that just re-invites the crack comparison into the discussion.

The people addicated to crack do so by their own free choice, do they not? They have a choice to buy crack, and so they should bear the responsibility for the consequences. Why, then, do we make *selling* crack a crime? Shouldn't a company be able to sell crack, and hey, if people are dumb enough to screw up their lives by trusting the company, tough break. After all, if the company is smart enough to figure out how to make a profit and people are stupid enough to cooperate, then that company should be allowed to do whatever.

Is the world a better place because of the existence of GM? There is absolutely no way to answer that question without visiting an alternative universe. I guarantee you that the answer is *not* an unqualified "yes".

Posted by: Observer on June 6, 2003 11:55 AM

I am both a customer and a shareholder of JPMorgan Chase. Despite the understanding that they are trying to enhance my share value by selling junk insurance, "special customer reward offer" clock radios, and credit card "enhancements" that add an annual fee, I wish they would stop sending me all the solicitations.

>I think the blue-collar workers need to take some (if not
>most) responsibility for their plight. While they spend
>their free time drinking beer, eating large slabs of pork
>and watching minor-league hockey, there is a small
>minority of people out there reseaching how to save and
>invest their money and free themselves of the paycheck-
>to-paycheck rat race.

It looks to me like most blue-collar workers work their butts off. Doing real work. Physically tiring stuff. You expect them to drink wine, eat rack of lamb, and go to the the opera AND save their paychecks? And if they all take responsibility and escape their "plight," who is going to make things, sell them to us superior beings, clean them, and fix them when they break?

Posted by: Shamhat on June 6, 2003 12:29 PM

The problem with crack is people on it drop out of every other activity (except stealin', dealin' or whorin') and stay high all the time. Thus we as a society don't want that. It's not illegal because it ruins people's lives, it's illegal because those people ruin OTHER people's lives.
(Well, and our society is pretty repressive)

It wouldn't bother me if all drugs were legalized. Tax marijuana and sell it anywhere tobacco is sold, and use all the minimum security prisons that are now empty to dispense free crack to anyone who wants to drop out completely, they just have to stay until they either die or get off crack.

I think it'd be shocking how much money the government would save and how much crime would be eliminated, freeing district attourneys to prosecuting the white-collar crimes that REALLY need it.

As for GM, is it better that they keep giving jobs to the decendents of those who worked for them until they finally fold and go from $7 billion to $0 billion?

Posted by: Humbaba on June 6, 2003 01:03 PM

One of the problems with this activity is that it tends to greatly depress the economy in the area due to a loss of productivity. It also leads to increase in the divorce rate, the crime rate and a decrease in the educational achievement of children for these families.

Am I talking about distribution of crack or closing down a plant and shipping the jobs to Mexico? Why is one legal and the other illegal? Sure, it's not exactly a fair question, but it's worth considering. Both activities ruin more than just the lives of the people who are involved (whether they are crack addicts or factory workers).

Hey, if it made the difference between GM existing or GM shutting down forever, then I might say ok go ahead and ship those jobs off. As it is, though, expatriating jobs probably doesn't make that difference (and you haven't answered the question I asked ... is it worth it to increase profits by a few percent?). Sure there are negatives for the company to keeping the jobs here, but there are also positives. Couldn't we write laws to make those positives more attractive? Not while Republicans hold power, that's for sure.

Posted by: Observer on June 6, 2003 01:38 PM


There is nothing that would prevent me from buying all the GM shares (or at least 50.1%) except that I don't have the resources.

My point is that the company IS owned by the shareholders and the shareholders have all the power. There should be no disputing this. Whether it is a $20 billion dollar company, like GM, or a corporation that I start with a few investors, the directors have to cater to the shareholders or risk losing their positions.

So if GM (or any company) does something that upsets its shareholders, such as losing a billion dollars a year keeping some obsolete plant open just to preserve 12,000 jobs, many shareholders will probably dump their shares or vote for a change in management.

My point is that GM and is no different than a small business trying to survive and reward its investors (shareholders) for risk and use of capital. GM nor any for-profit corporation has any explicit obligation to the communities where they conduct business. They do risk negative perception if they act in an irresponsible or unethical, yet still legal, manner. But again, that only affects the shareholders.

Crack, morphine and other drugs should continue to be illegal because they are physically addictive and the addiction can lead to unproductive and destructive behavior. Coca-cola should be prohibited from putting cocaine in their product because the addictive properties and long-term affects are well known. Nicotine, alcohol and caffeine are also physically addictive, but their detrimental affects are either not as well documented or their suppliers have sufficient clout or lobbyists.

I have more empathy and compassion for people who are addicted to drugs than I do for someone who doesn't save and invest and winds up homeless because they lost their job. Both are the result of a lack of discipline.

Posted by: AC on June 6, 2003 01:53 PM

My problem with the whole "shareholder/profit is king" idea that you are espousing is: Do you even pause to consider the morals and ethics of the situation for a microsecond? America is not a theoretical construct from an economics textbook. It is full of real people who fight and struggle for what they earn and sometimes get their ass kicked anyway.

Your theoretical *idea* of being able to control 50.1% of a company is all well-and-good, but it's only theoretical. You are really quite eloquently (if unintentionally) making Kinsley's point for me. Our whole system of laws and government is not based on what's best for shareholders but (supposedly) what is best for the people.

Sometimes (but definitely not always), the interests of people are aligned with the interests of corporations. Corporations have an obligation to this country to give a little back to the system that makes their very existence possible, not just their shareholders. And don't try to tell me they pay their fair share of taxes, because we all know that's patently false.

Would the world be a better place had Enron never existed? How would you have answered that question two years ago, before any of these scandals broke (but the warning signs were plain as day)? When a company gives up all concept of ethical behavior, it can affect more than just the shareholders and employees.

More on this special edition of the "Oprah book of the month club" after this commerical break. :)

Posted by: Observer on June 6, 2003 02:24 PM

We're back from the break, and I have one more question: You say you have no sympathy for the people who don't save up and plan for problems, etc. People who live for the moment and presumably spend their lives outside of work just being generally stupid and screwing around unproductively.

Ok, fine. Are you going to punish their kids, too?

Posted by: Observer on June 6, 2003 02:28 PM

I agree that corporations don't pay much in taxes, but most corporations do pay taxes on their profits. The average corporation paid 4.6 times as much tax as the average taxpayer. I know this isn't really valuable information, since the average corporation probably had 100 to 1000 times the GROSS income of the average taxpayer.

Yes, I'm pro-business. The benefits of corporations extend far beyond the taxes they pay. They allow people to take risk with limited liability. This in turns creates jobs, encourages innovation, etc.

I feel that 80% of our population is screwed by our tax system. The wage earners (high and low) pay a disproportionate amount of taxes in our society. However, I do think that most of these people are, for lack of a more tactful way of saying it, are too lazy to do anything about it. Yes, some are just incapable of changing their lot in life, but those are few and far between.

I've accumulated quite a bit of wealth mostly by living way below my means. I don't drink or smoke. I pay cash for used cars and drive them into the ground. I eat out once a week and spend more than $25 per head per meal maybe once a month. I didn't go on expensive vacations. I don't send my kids to private schools. I use my library card often. I've never bought a pair of shoes that cost more than $100. Xmas and b-day gifts in my house are handmade. In a nutshell, I saved and saved until I had enough money so that I wasn't a slave to my paycheck. I'm not trying to boast, but I saved over $500k by the time I was 30 and I never made more than $100k/year in salary. The only thing that indicates that I have any wealth is that my house is a nice part of San Francisco.

Not everyone has this discipline, I agree. The main problem is that most people don't have very good self-image; they spend money they don't have on things they don't need to impress people they don't even really like. I feel bad for their children, but my parents were pretty middle class and didn't give me any more than a safe environment to grow, food and emotional support. The other problem, I think, is that people watch too much TV and they want everything they see. The government loves this, since these people now have to work 40+ hours a week to fulfill their consumer "needs." People who make a fraction of what I lease BMWs because they think that a nice car makes them wealthy. What do people really need anyway? A roof over their heads, some food on their table, and their health. After that, peace of mind or being able to sleep at night is next most important. Everything else in life is gravy and I sacraficed it all until I was financially independent. It did suck when my friends wanted to take expensive cruises or ski weekends, but now I sleep soundly at night while they worry about their adjustable rate mortgages and not pissing off their boss.

But I'm digressing. I didn't set out to say that.

With regards to Enron, who do you think got burned more? The shareholders or the employees? The employees can find another job. The shareholders are the ones that lost the money. Was it good for the economy? Yes, because it is a necessary "lesson" of investing. If one thinks he can get rich by doing anything other than working hard, he is surely going to lose his money. The greediest bastards got burned by Enron and I think that is a good thing. Greed outweighed fear. If Enron grew 100 times, it would have created many people with money which would have decreased our (yours and mine) buying power. So yeah, it was good.

But you are right. I am wrong to suggest the world is better because of GM. It is what it is. The shareholders (longterm) have benefited the most by far. Is our world better because of corporations? Yes! I think that the corporation or limited liability company is the greatest concept of last 400 years. It far outweighs what the steam engine and electricity have done in terms of improving our standard of living.

I'm dying to read the books you've recommended, but either my library doesn't have them or they are checked out. Can you create a reading list?

Posted by: AC on June 6, 2003 04:24 PM

Hum. My biggest problem with corporations (that I can think of off the top of my head) is moving factories and such out of America to get dirt-cheap worker rates. For several reasons.

As to crack ... heh, I couldn't resist such a comment. Crack, as the cheaper (safer) base form of cocaine is not illegal because it ruins people's lives. Hell, it was/is illegal before it was even "created" if you will. Why? Hum, many forces involved, but I'd say most involved were taxes (as in trying to tax it), as they say with most such illegal drugs, but more importantly, there was a fear of it getting "in the wrong hands" if you will, the violent problems caused by something under its influence, either in trying to prevent them from hurting others or trying to stop them from hurting others, etc.

But, in the immortal words of South Park's Mr. Mackey -- "Drugs are bad mmkay."

So does this have anything to do with the movie Michael Moore made in 1989, Roger & Me, about the GM plant closure in Flint, Michigan?

Posted by: Polerand on June 6, 2003 04:40 PM

Wait, so you live a frugal lifestyle and save and save and save, go to the library, don't go out to eat much, etc., BUT YOU LIVE IN SAN FRANCISCO?!? Damn, pick a place with a lower cost of living! Get at the tail end of one of those BART runs and do a long commute or go work in the midwest! :)

Seriously, though, I would no more question your choice of a place to live than I would question anyone's choice about how to spend their own money. That's what freedom is all about.

I'm also pro-business. I'm *also* pro-ethics. At Enron, the employees *were* the shareholders (company policy), but somehow they ended up screwed while the executives got out with millions. Funny how it always works out that way.

Put an email link on a comment, and I can send you my whole lot of book reviews and recommended books, etc.

Yes, Polerand, it's the same Michael Moore writing about the same stuff. He wrote this book a couple of years after the movie came out. He's got a couple more out since then that I'm looking forward to reading.

So anyway, yes, corporations are a great engine for jobs, prosperity and growth, but just as they contribute to our country's greatness, our country and our way of life contribute to the greatness of corporations. There is mutual responsibility there, and corporations like GM that downsize not to survive but to increase profitability by just a little bit are shirking their responsibility.

And to the extent shareholders have a voice (which is very, very limited except for a few hundred individuals who control many shares), they share the blame. All that said, even if the workers are idiots and have no one to blame but themselves for allowing the executives to loot the company or move jobs overseas or what have you ... you want to make them suffer and pay the price, that's fine.

What about their kids? Tough shit for them, or what? You going to create a strong safety net for them? Not if you are a Republican, I can tell you that.

Posted by: Observer on June 6, 2003 04:56 PM

I actually consider living in SF a bargain. The weather, the culture and the opportunity (for me) can't be found anywhere else. You can find some real value in housing in really expensive areas as high-income people get laid off too. In the Bay Area, I can find a house worth $800k that I can buy for $650k if I look hard enough. In the midwest, I'd look just as hard to find a $160k house for $130k.

Polerand: You dislike corporations pursing cheap labor? A corporation is just like a person who is looking for the cheapest price. Your thinking would be similar to someone from Califonia disliking a corporation that moved to Mississippi because they could pay employees $12/hr instead of $15/hr. Or me disliking you going to jiffy-lube for an oil change rather than paying my service station $50 to do it. The reason why your 27" TV costs $300, your 6 cylinder, fuel-injected car with power windows costs $20k, and your imac costs $799 is because of corporations pursing cheap labor. Period. If you don't like it and want to do something about it, buy American regardless of value. imo, this is what made GM, Ford and Chrysler such shitty companies in the 70's and 80's; they relied on people buying American rather than just making better cars.

I feel bad for their children of someone layed off. However, I have no sympathy for someone who makes $66,560/year, the average wage of a blue-collar GM employee, who spends more on beer, cigarettes, cableTV, extravagant vacations and cars, credit card debt than they save/invest in their own and their children's future.

Who do I feel sorry for them? Mostly inner city minority kids who really have no means to educate themselves because their schools suck, their communities aren't safe, their parents (who can't even make enough money to buy cigarettes), and there isn't much future for them because of institutional and societal racism.

Pretty much everyone else who is able-bodied and isn't supporting their parents makes a concious decision to live paycheck-to-paycheck rather than be financially independent. I'm not saying these are bad people and they definitely aren't stupid. It's a choice. I may die tomorrow without buying all the toys, eating the best restaurants, or staying in the finest hotels and all my sacrafice was "wasted." But I get true joy out of not worrying about the economy or GM's decision to close my factory. That peace of mind is worth more than driving a Mercedes, having a bigscreen TV or going to Hawaii. I respect people who choose to enjoy life today, I just don't feel sorry for them when they lose their job.

Were the employees of Enron who lost their stock options forced to work at Enron? How much did the $40k/year secretary lose in stock? I believe the top 50% of wage earners at Enron lost more value than the bottom 50%. Yes, people did get screwed. But anyone who elected to be compensated by stock option in lieu of salary deserved it. If they didn't like it, they should have found a different job.

There is no crime in being unethical, sadly. Each individual has to deal with the consequences of being and being perceived as unethical. Many people consider tobacco unethical. Some people consider McDonald's unethical. And some even consider all business as unethical. We can't do anything about what we perceive as unethical people/businesses except to run and run fast. You'll probably disagree, but the most successful people in business usually have impeccable ethics.

Nothing is stopping you from starting Carpe-ron Corporation, raising millions in capital, going public, paying yourself $2 million/yr in salary and then bankrupting your company. Personally, I think there are easier ways to make money without having to deal with all the public perception of being a slimeball. I feel like people who blame executives believe that they set out to defraud everyone.

Oh...and regarding the book list, I'd like to see a continually growing list that I can reference.

Posted by: AC on June 6, 2003 06:49 PM

A good uhhh friend of mine long ago put together a page full of book reviews once, but he stopped updating it a couple of years ago. No relation to me of course as we here at Carpe, Inc. try our best to maintain pseudo anonymity in order to have the freedom to comment on various things such as stupid students.

Anyway, it's not a bad idea to maybe use some of my sidebar blank space for a running list of books I've talked about here. Maybe if I'm feeling ambitious at some point soon...

Posted by: Observer on June 6, 2003 07:34 PM

Oh, I knew it was the *same* Michael Moore, I was just wondering how related the book was to the movie, you know.

Cheap prices are not always the best thing in the world. Everything's cheaper if you steal, anyway, so I don't bother purchasing things.

Posted by: Polerand on June 7, 2003 12:16 AM

GM doesn't exist in a vacuum. They have to be able to compete with Toyota and Daimler.

Plus, those Mexicans need jobs too. Have you no sympathy for them and their children? Are we the only ones in North America who should profit?

NAFTA is a very good thing. It helps FAR more than it hurts.

Posted by: Humbaba on June 7, 2003 01:01 AM

Yes, I have sympathy for the Mexican people, and I hope they elect themselves a government that can help them out. From an ethical standpoint, a concern for the general well-being of the Mexican people is *not* anywhere *close* to the reason jobs are being exported.

Posted by: Observer on June 7, 2003 11:06 AM

"Cheap prices are not always the best thing in the world..."

I agree 100%. If fact the whole "pay less, get more" attitude is one major reason why our society is so cutthroat and short-sighted. People want to "earn more, work less" and "be taxed less, but get more." They don't look to the future but think about what they can do now to get ahead.

I have a duty, if you will, to my family to provide them with shelter and a nurturing environment. I can't do that and pay a unionized plumber $45/hr to unclog my sink when Juan (his real name) will do it for $15/hr and he will be genuinely appreciative.

As we seem to be wrapping this up may I share my final thought? I grew up in SF so I was pretty leftwing in my youth. As I matured, I sadly concluded that the only way you can change things in this world is with money. I now realize that things are the way they are because people with money made them that way.

My advice to the idealists is to make some money. Then, if still willing, use the money to try to influence those that make the changes. Chances are, you won't want to change things once you've worked hard to go from the "have-nots" to the "haves." You'll feel like "I worked hard for all of this and I can't understand why other aren't willing to do the same."

Posted by: AC on June 7, 2003 01:45 PM

That's an awesome closing.

Posted by: Humbaba on June 7, 2003 03:09 PM

The next time a rich idealist speaks out or does something for a liberal cause (say, opposition to the war in Iraq, opposition to elimination of the estate tax, increase the minimum wage, etc.), watch how they are treated by the corporate media (TV, radio, newspaper, magazines).

Posted by: Observer on June 7, 2003 03:56 PM

>My advice to the idealists is to make some money. Then,
>if still willing, use the money to try to influence those that
>make the changes. Chances are, you won't want to
>change things once you've worked hard to go from the
>"have-nots" to the "haves." You'll feel like "I worked hard
>for all of this and I can't understand why other aren't
>willing to do the same."

That's what they keep telling us is wrong with the Americans' opinions on tax policy: every poor dumb sucker who has a mortgage and a few shares of GM thinks he's one of the rich, and thus supports tax cuts for the rich. That's just too funny.

It's true that the little guy can throw his weight around on the local level. I once got a state senator (Florida) to change his opinion on an issue. I think I only donated about $500, did some graphic design, held a "meet the candidate" party at my home, and drove a van during the primary that was postponed due to the hurricane.

Influencing federal legislation costs millions. When my ex was at JPMorgan, every VP and above was required to donate $1000/year to the lobbying effort for at least the last 5 years before Glass-Steagall was repealed. That's only ONE investment bank.

But, you know, I'm a stockholder, so I'm sure that put money in my pocket and I'm glad they did it. Yeah, that's it.

Posted by: Shamhat on June 7, 2003 08:21 PM

You know, there ARE those of us who thought that a graduated income tax wasn't fair to rich people when we were butt-poor. I've felt that way when I made no money, and now that I am comfortably middle-class with basically no prospect of being rich (financially, at least. I'm very happy, which is way more important) I still feel that way.

Posted by: Humbaba on June 7, 2003 09:15 PM

Actually Humbaba, from reading your blog, I would guess that you are a person on his way to being financially independent. I think you own your house and, more importantly, you own someone else's house.

If you don't do something foolish, like refinance and take cash out and blow it on an SUV, you'll own your rental property free and clear in, say, 20-25 years. Rents will go up. In 20 years you could be living off the rental income of that one property.

I was a wage earner until I realized that if I owned an 8-unit building, the income from that building would equal the median income of someone in my city, since most people spend about 1/8th of their income on housing. Actually, it's more like 1/4 to 1/3 here in SF, but that made the rental income all that much sweeter. The best part is that I wasn't trading time for money anymore and I could pursue other things that I truly enjoyed while having a "stable income."

I got damn lucky and found lots of "cheap" buildings and then rents skyrocketed. It was hard work. I fixed toilets, cleaned and repaired things myself for the first 3 or 4 years.

Shahmat. I benefit greatly from these new tax cuts but I very much oppose them. I view taxation and wealth like the problem with the wolf and the rabbit. If the wolves eat all the rabbits, the wolves will eventually vanish. However, if the wolves vanish, the rabbits will proliferate until they all die from lack of food. Producers need consumers and if producers deprieve workers of their fair share, they deprive themselves of the affluent consumers they need to make their facilities profitable.

We are heading to a cycle of where the wealthy have too much wealth and it will lead to lower productivity all around which will in turn hurt everyone. Worse, it could lead to a revolution.

I study the tax code and plan accordingly. If they are treating dividends favorably, I take my retained earnings as dividends rather than salary. Sadly, I don't go out and by a new TV or refrigerator, which is what middle class people tend to do with a windfall. However, I do invest in new businesses, which in turn create new jobs, but I'm not your typical greedy bastard. So in a nutshell, it's next to impossible to successfully tax the wealthy people in this country. You can tax the highest income earners 60% marginal tax, but most business owners can control their realized income, whereas wage owners can't.

A lot of middle class wage earners make $150k-$250k per year. They live paycheck-to-paycheck. If you raise taxes on the "rich" or high income earners, you will get more money from them. But I will just retain more earnings in my company at the 15% corporate rate and then pay myself a dividend at the 15% personal income rate rather than pay 60% federal, 15% payroll, 9% state and a whole batch of misc other taxes.

Yes, the tax code favors the wealthy. But that's because it takes money to make the rules. I'd like to believe that rewarding risk and investment will eventually benefit all (ie, trickle down, supply-side), but I understand that most people (usually the have-nots) don't see things this way. So the question: How do you make the have-nots feel like they are not getting the shaft so that we aren't headed to a revolt? I'm in favor of doing away with all taxes for the first $100k in income. Producers will benefit from 1) increase demand for goods and services and 2) less ill-will towards the wealthy.

Posted by: AC on June 9, 2003 10:00 AM

AC- So you think that people should have more "self-discipline" and be a frugal cheapskate like you to have $. What you fail to realize is that we have a Consumer Society based on consuming, not saving. You write that you are Pro-business, yet your modus operandi is anti-business and a CEO's nightmare: a few more million people like you(avoiding consumption and debt finance) would cause many businesses to go belly up, and probably your job with it. You'd better hope that the majority continues to consume(which you despise) and rack up debts or your little world will go busto rather quickly.
As another poster pointed out here, if you are so frugal, why do you live in SF??? Climate and culture? Let me see... rains alot there, the cultural aspects cost $$ which you say that you never spend, and I don't see what is so high cultural about a city like SF anyway(trollycars, burned-out hippies,spoiled trustfunder rich kids,communists, sodomites...big deal.Sooner the Big One strikes and SF and LA fall into the Pacific, the better).

Posted by: Atreides on April 27, 2006 09:00 AM