Balkinization: Are we Americans optimists? Or suckers

Comments:

A small point: I recently read -- where exactly escapes me at the moment -- some psychological research that backs up Holland's point. I.e., people tend to be overly optimistic when it comes to themselves. We have a sort of cognitive dissonance that stops us from imagining that bad thing will happen or good things *won't* happen (to us). I won't get cancer. I'll get the promotion. Or, most apropos here, I'll work hard and get rich.

I think I came across this research in a recent Sunstein paper. Not sure . . .

# posted by

Calvin TerBeek : 12:00 PM

I'm sure it's some of both. A local pub now features Keno for patrons who do not understand probability. Quite often they complain that the game must be fixed. For some reason that does not stop them from playing.

# posted by

Bartbuster : 12:14 PM

I think there is more class struggle in this country than many people recognize; it just doesn't take the classical Marxist form of worker versus employer. Instead it takes the form of consumer versus manufacturer (through product liability suits) or homeowner versus developer. Just as left wingers constantly lament our low rate of unionization, right wingers lament our litigiousness. It means that Americans define ourselves as consumers and property owners, rather than as workers.

Someone should write a piece on this someday.

# posted by

Essayist-Laywer : 12:20 PM

Maybe Americans are actually just pessimistic about inflation.

# posted by

Anderson : 12:53 PM

I've noticed this tendency and spoken of it to friends of mine, and I think that beyond whatever innate tendency there may be for humans to believe they will prevail in life's challenges--a necessary belief, probably, in order for most of us to soldier on at times--this is a result of the incessant propaganda directed at Americans by advertisers and corporate media to the effect that we not only CAN have it all (wealth, youth and good looks, chic wardrobes and ritzy homes, etc.) but that we MUST have it all--buy it all--in order to count, to be worthy human beings. People who mortgage their futures to credit card debt in order to own extravagant consumer goods believe themselves to be affluent when in truth they're simply living beyond their means.

People support economic measures that are inimical to their own self-interests because we have been hornswoggled into not recognizing our own self-interests. For example, we think that the removal of capital gains taxes and inheritance taxes--the so-called "death tax"--are necessary in order for ordinary working citizens to be able to pass along to their heirs whatever modest estates they may have; they don't realize these taxes apply to people of vastly greater wealth than they will ever possess.

Also, apparently, many Americans see themselves as being higher in the economic hierarchy than they are, (that is, they may be middle or even lower middle class yet they perceive themselves as upper middle class), and they are thus susceptible to pernicious messages that cast progressive social policies or tax rates as being harmful to themselves rather than the boons they might actually be.

We believe ourselves to be members of a country club that in truth we will never see the inside of, (except as the hired help).

# posted by

Robert Cook : 1:03 PM

There are so many points to make about the linked reports that I will have to post after work on this.

However, I would note in passing that only in an AlterNet-ive universe is the fact that the number of millionaires grew by 14% in the US compared to 2% in the EU somehow commends the EU economic model.

Indeed, one of the biggest stories over the past 25 years is the enormous growth in US millionaires which coincides with the spread of the American investor class.

It is more than possible for the third of the nation who want to become millionaires to reach that goal by the time they retire if they simply invest a modest portion of their income into equities, bonds and real estate and watch it grow.

In sharp contrast, government redistribution never made anyone wealthy.

# posted by

Bart DePalma : 1:11 PM

There are a lot of lottery democrats who oppose high taxes (income, estate, etc) and in effect vote against their pocket book interest because (drum roll!) when they hit the lottery they don't want to pay any stinkin' taxes on their winnings. This is despite the odds and the fact that they rely upon some form of subsistence funding from government sources. Lottery democrats watch reality shows with the thought "That could be me."

# posted by

Shag from Brookline : 1:16 PM

shag from brookline said...

There are a lot of lottery democrats who oppose high taxes (income, estate, etc) and in effect vote against their pocket book interest because (drum roll!) when they hit the lottery they don't want to pay any stinkin' taxes on their winnings. This is despite the odds and the fact that they rely upon some form of subsistence funding from government sources. Lottery democrats watch reality shows with the thought "That could be me."

For nearly everyone, making money is not a "lottery" and has very little to do with luck. Making substantial amounts of money is nearly certain if you get an education, work hard and put a portion of your income to starting a business or investing in others' businesses. This is the American dream which is denied to most others around the world by their governments.

You will never get wealthy by depending on the government to steal money from those who are creating wealth, taking its cut and then giving the rest to you with various strings attached. The stolen money you will receive from Uncle Sugar will not make up for your diminished opportunities as economic growth stagnates and unemployment soars as it has in the EU for nearly two generations now.

Finally, it is no surprise that those who intend to create their own wealth oppose being robbed by the government of the fruits of their hard work.

# posted by

Bart DePalma : 1:40 PM

Here are two words for Lisa's brother's final paragraph:

Warren Buffett.

# posted by

Shag from Brookline : 3:12 PM

For Warren Buffett:

Now that you have made your money under the low Reagan capital gains rates, bugger off about raising taxes on me and millions of others as we make our retirement nest eggs.

If you are feeling in a charitable mood, I suggest that you bypass the government and follow the lead of Bill Gates.

# posted by

Bart DePalma : 3:28 PM

Today there is agitation about abortion, religion in the public sphere, racial prejudice, gay rights, and civil liberties, but on the economic unfairness of the system there is much less intellectual attention and public action. Why is that?

Because of a multi-decade effort of certain wealthy individuals and families to fund institutions that agitate on those social issues, precisely in order to distract average citizens from the rogering they're getting economically. What did you think Richard Mellon Scaife and the Olin Foundation have been up to all these years, anyway? It's not exactly like they've been secretive about their goals.

# posted by

Kenneth Fair : 4:12 PM

"...it is no surprise that those who intend to create their own wealth oppose being robbed by the government of the fruits of their hard work."

If taxes are "robbery," I have to assume you oppose ALL taxation under any circumstances. It would certainly be odd to say that some robbery is acceptable some of the time.

# posted by

Scott : 4:21 PM

Some years back Saturday Night Live did a hilarious parody of a Lotto commercial, in which one person after another would earnestly look into the camera and share a personal Lotto success story that tracked the narrative logic of the American Dream (e.g., "They all said I couldn't do it, but I kept at it, and look at me today" (or words to that effect)).

# posted by

"Q" the Enchanter : 4:46 PM

Several commenters touched on the cause of this "optimism." The cause is The Manufacture Of Consent. Before we enact other reforms, first we must stop the PR firms and the lobbyists.

# posted by

littleblackpropaganda : 4:57 PM

don said...

"...it is no surprise that those who intend to create their own wealth oppose being robbed by the government of the fruits of their hard work."

If taxes are "robbery," I have to assume you oppose ALL taxation under any circumstances. It would certainly be odd to say that some robbery is acceptable some of the time.

I never posted that all taxes are theft.

Taxes for the purpose of taking money from the proverbial Peter to give to Paul are theft. If you personally perpetrated this kind of "redistribution," you would be properly jailed.

In contrast, taxes for the purpose of delivering services to the general public are perfectly proper, although even these should be kept to a minimum because there is very little the government can deliver which the private sector cannot deliver better.

# posted by

Bart DePalma : 5:02 PM

When I teach Marx in political theory classes I show films such as "American Dream" by Barbara Kopply, about the Hormel meatpacker's strike in Austin MN in the early '80s' and a relatively critical documentary by Hedrick Smith about Walmart. This offers excellent material to discuss our positioning as producers and our positioning as consumers and what "rights" mean in those respective contexts. Students typically end up thinking a lot more about what they are doing when they work rather than when they shop and are surprised by how little awareness they had as to the distinction and the consequent vulnerability they experience as citizens (being treated primarily as consumers of goods rather than as creators of wealth).

# posted by

Unknown : 5:13 PM

Surprise, surprise, Lisa's brother is at the top of the income chain with Warren Buffett and Bill Gates! Who knew? Buffett's concern is that the really, really wealthy, like himself, Bill and presumably Lisa's brother do not pay a fair share of taxes. Buffett wants to help people lower down the chain, with less income, less wealth, to pay less in taxes than he, Bill and Lisa's brother. Buffett want to reduce my taxes. Thanks.

By the way, charitable contributions (other than taxes) can be made to the US, state and municipal governments and provide the payor a charitable deduction for tax purposes, subject to certain income limitations of course.

# posted by

Shag from Brookline : 5:16 PM

"I never posted that all taxes are theft."

I understand your position now. Taxes levied for purposes that you oppose on ideological grounds are "theft." Taxes levied for purposes you do not oppose are "perfectly proper."

Thanks for the clarification.

# posted by

Scott : 5:26 PM

Bart said, "I never posted that all taxes are theft...taxes for the purpose of delivering services to the general public are perfectly proper...."

Yes, and given that wealthy individuals and corporations often pay proportionately less in taxes than the majority of Americans who are mere wage earners, the rich are robbing the rest of us blind.

# posted by

Robert Cook : 5:32 PM

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# posted by

Bart DePalma : 5:37 PM

shag from brookline said...

Surprise, surprise, Lisa's brother is at the top of the income chain with Warren Buffett and Bill Gates!

Huh? You are unlikely to see my smiling mug on the cover of Fortune Magazine any time in the near future, even though I use many of Buffett's investment strategies.

Buffett's concern is that the really, really wealthy, like himself, Bill and presumably Lisa's brother do not pay a fair share of taxes. Buffett wants to help people lower down the chain, with less income, less wealth, to pay less in taxes than he, Bill and Lisa's brother.

robert cook said...Yes, and given that wealthy individuals and corporations often pay proportionately less in taxes than the majority of Americans who are mere wage earners, the rich are robbing the rest of us blind.

As of 2003, the the top 1 percent of taxpayers (where Buffett and Gates reside), ranked by adjusted gross income, paid 34.3 percent of all federal income taxes, the top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top 25 percent paid 83.9 percent.

As a point of comparison, in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent.

Consequently, while one may want to go to Mr. Buffett for investment advice, his take on taxes makes no sense whatsoever.

# posted by

Bart DePalma : 5:39 PM

"Yes, and given that wealthy individuals and corporations often pay proportionately less in taxes than the majority of Americans who are mere wage earners, the rich are robbing the rest of us blind."

Of course, this assumes that people morally owe taxes proportional to income. Which is a strange proposition; The wealthy and corporations don't receive services proportionate to their income, do they? I mean, 80-90% of the California police don't follow Bill Gates around playing bodyguard for him. The state hasn't built a whole parallel set of roads for his exclusive use. Heck, they don't even clear the roads of other traffic when he drives on them.

The fact is, he probably doesn't get significantly more in the way of government services than some dude who pulls down a measely $200,000 a year. Unless we're going to go all tautological, (Which some do at this point.) and declare that the chief 'service' he receives from the government is not having his wealth confiscated, which by definition is proportionate to his wealth.

No, the wealthy are in fact ripped off, because almost the entirety of the taxes they pay goes to pay for other people's services, not their's.

# posted by

Brett : 7:21 PM

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# posted by

Bart DePalma : 7:41 PM

OK, let's start breaking down the points of the linked articles.

1) Julia Issacs' study "Economic Mobility of Families Across Generations" shows that the United States has a meritocratic earning structure where 2/3 of children earn more than their parents when adjusted for inflation. Moreover, families are far better off than their parents because there are far more earners for each dependent than in the past.

Indeed, the inflation adjustment used by Issacs is most likely overstated because our income can actually buy far more goods than our parents. The Walmart effect which renee bemoans above makes it possible to buy middle class goods on a working class salary. The average household today owns items which were science fiction during our parents' generation.

In sum, our economy has created far more jobs, 2/3 of which are providing more income than any other developed economy. What makes this even more amazing is that we have absorbed tens of millions of low skill immigrants during this period who have also flourished.

2) The 1/3 who earn less than their parents are actually concentrated in the top quartile of earners. The poorest among us have increased their income the most over the past decade.

In fact, our economy allows the native poor to increase their incomes so quickly, that we are actually importing our poor to perform what would be considered working class jobs. However, our immigrant poor rarely stay poor for long because their incomes dramatically improve as they gain language and work skills.

The fact that millions of poor continue to immigrate into this country expecting a better life puts the lie to the propaganda that our poor keep getting poorer. If that was the case, immigration would halt and reverse.

3) The studies which purport to compare US, UK and Nordic incomes between fathers and sons use totally incomparable databases from different time periods. Moreover, the US databases are completely insufficient for comparison of individual income. The NLSY purports to measure family income rather than individual and the PSID has such small samples that the study authors admitted it had limited use.

Time for dinner. There are many more problems with the linked reports, but I hit the major ones.

# posted by

Bart DePalma : 7:45 PM

What makes this even more amazing is that we have absorbed tens of millions of low skill immigrants during this period who have also flourished.

Or, that makes it less amazing, as the bar for improving one's income over one's parents is actually lowered in the case of low skill immigrants.

Whatevs. Income =/= quality of life. They may be related, but they aren't identical.

# posted by

PMS_CC : 8:28 PM

None of this is all that amazing when you observe the innumeracy of the vast majority of people. As a simple example, Brett asserts with certainty that the rich pay far more in taxes than they get back in benefits. Pray tell, using what metric? Consider, if you will, the benefit the person just scraping by and paying minimal taxes gets in return for that portion which is used for national defense, compared with the amount Bill Gates pays.

Do they both get the same value? The one just scraping by has little to lose if Cuba invades, while Bill might lose a lot.

I do not find any of these arguments totally compelling, but those who imagine that a dollar is worth the same to a man living under a bridge and to Bill Gates, or even that they can measure the relative worth of those dollars, are delusional.

Those who are incapable of understanding how to use mathematics cannot apply metrics to ascertain their self-interest, even if such metrics exist.

# posted by

C2H50H : 8:45 PM

"Do they both get the same value? The one just scraping by has little to lose if Cuba invades, while Bill might lose a lot."

As expected, the tautology rears it's head, seeking to define the benefit one receives from government as being at least proportionate to income. I'm not persuaded.

# posted by

Brett : 9:14 PM

As expected, the tautology rears it's head, seeking to define the benefit one receives from government as being at least proportionate to income. I'm not persuaded.

There's no tautology involved. Think about it this way: suppose we made the military or police available by auction only. Would Bill Gates bid more than I would? Almost certainly, yes. In that case, it's fair to attribute to him that extra value of the protection.

# posted by

Mark Field : 10:26 PM

mark field said...

As expected, the tautology rears it's head, seeking to define the benefit one receives from government as being at least proportionate to income. I'm not persuaded.

There's no tautology involved. Think about it this way: suppose we made the military or police available by auction only. Would Bill Gates bid more than I would? Almost certainly, yes. In that case, it's fair to attribute to him that extra value of the protection.

However, Bill Gates is not bidding for military and police protection. In reality, Gates is paying exponentially more than you for the same police protection, all for committing the sin of fulfilling most of the world's need for computer software.

Talking about being punished for good deeds...

# posted by

Bart DePalma : 10:44 PM

Brett is merely asserting that anybody who doesn't accept his "a dollar is worth the same to everyone" is guilty of asserting "a tautology".

This would appear to deny the concepts of psychology, what little I know of economics, and simple common sense.

It does make the mathematics simple enough for Brett to understand, which may work for him, I suppose.

Bart's assertion that Bill Gates gets no more police protection than the guy in the homeless shelter -- that kind of ability to deny reality goes well beyond innumeracy and into the realm of delusion.

# posted by

C2H50H : 10:57 PM

"Of course, this assumes that people morally owe taxes proportional to income. Which is a strange proposition; The wealthy and corporations don't receive services proportionate to their income, do they?"

Well, yes, they do; they just don't realize them, perhaps, through the taxes they pay, but through the greater influence and more direct access to power afforded them by their wealth. Hell, paying proportionately lower taxes than wage earners is one of the benefits they buy with the voice their wealth gives them.

But, why assume one should receive services proportionate to one's income? This has to do with having an investment in one's society as a whole, with having a stake in the betterment of social conditions for everyone. Presumably, we pay taxes as a means to fairly share the expenses for government and the services it provides to all of us as citizens equal before the law, as it were. Those of humble means should be asked to bear part of that shared burden to a degree that is not unbearable relative to their capacity to pay; those of more handsome means can be asked to share more of the burden, not because they will receive more in benefits, but expressly because they can afford to pay more.

If we reduce payment of taxes to a mere quid pro quo, where one may be fairly asked only to pay taxes commensurate with the benefits one will receive in return, we might as well allow the wealthy to build their own private enclaves where they may employ their own private police and fire services, where they travel over their own private roads and bridges, and where those less affluent--still the vast majority of American citizens, after all--must live comparatively hobbled lives, where sanitation and roads and health services and legal services and police protection and so on are available to far lesser degree, and of far lower quality, as a consequence of the more meager resources available to pay for them.

In other words, let's throw out the American experiment and simply declare outright what seems to be a sub rosa reality: that we live in a two- or even three- or four-tier society of haves, have nots, and have mores.

# posted by

Robert Cook : 10:58 PM

If I could make a Modest Proposal: Why not tax the poor at a higher rate and give the windfall to the rich? After all, given efficient markets, the wealth of the rich reveals their ability to make more productive use of capital.

# posted by

"Q" the Enchanter : 11:14 PM

Once more: lies, damned lies, and statistics:

"As of 2003, the the top 1 percent of taxpayers (where Buffett and Gates reside), ranked by adjusted gross income, paid 34.3 percent of all federal income taxes, the top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top 25 percent paid 83.9 percent.

As a point of comparison, in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent."

Checking the charts, it appears that in 1980, when the top 1% of income earners represented about 7% of total income, they paid about 19.3% of income tax. In 2003, the top 1% represented about 13% of total income, and paid 34.3% of income tax.

Hmm. The top 1% represented about twice as much of total individual US income in 2003 as they did in 1980. It's then not surprising that they would pay about twice as much in income tax in 2003 than they did in 1980. They're not being unfairly targeted, but still paying about the same share as a percentage of total income, regardless of the fact that their nominal tax rate has been cut significantly. The above attempt to claim (or at the least to imply) that the top 1% is over taxed is pretty specious.

# posted by

Fraud Guy : 12:37 AM

Another point of order; the income tax rates do not include the various payroll taxes that are deducted only from the first $100K or so of income; the top quintile pretty much escapes these on their income over that point, so their overall tax burden lessens the more they make.

# posted by

Fraud Guy : 12:40 AM

"But, why assume one should receive services proportionate to one's income"

I don't. I assume that, all things being equal, one should get what one pays for, and pay for what one gets. That if I and Bill Gates walk into McDonald's, and both order a double cheeseburger, we should both pay 99 cents. That is the morality of the merchant, and it's my morality. It's a lot of people's morality.

"If we reduce payment of taxes to a mere quid pro quo..."

Indeed, if somebody manages to arrange to receive no services from the state, it IS difficult to figure out by what principle of justice the state none the less taxes them. "Because it can.", I guess. Is that a principle of justice?

The point here, is that you can't just assume that, OF COURSE, the wealthy 'owe' taxes at least proportionate to their income, and point to the failure of the non-wealthy to force them to as the non-wealthy being suckers. This is moral reasoning on a par with thinking that, whenever Bill Gates walks into a restaurant, and the other patrons don't mug him to obtain the price of their own meals, they're being "suckers".

Maybe the non-wealthy aren't "suckers", maybe they're moral, and it's a morality you happen to not agree with.

# posted by

Brett : 6:38 AM

"I assume that, all things being equal, one should get what one pays for, and pay for what one gets."

Yes, and in paying taxes in a functioning society, one contributes to the physical infrastructure of the country, to the educational system of the country, to the healthcare system of the country, to the social services of the country, and so on. In short, in return for one's taxes, one gets a well-educated, healthy citizenry who are functioning members of a society where all are equally protected by police and fire services, where all may live in safe, well-maintained neighborhoods to which and from which we all may travel over safe roads, bridges and tunnels, and where there really is an attempt by government to attend to the commonweal.

"The morality of the merchant," as you call it, places a price on everything and requires that everyone pay that price or go wanting. Such a "morality," (sic) sees us all not as a community of citizens, as neighbors and fellow participants in the management of our own society, and the welfare of all as being a benefit not only collectively but individually, but only as consumers and sellers, and all interactions become only transactions, where all is commodified and "morality" itself is merely cynical rhetoric, employed by the powerful to keep the powerless in line, but where no social behavior is enacted that is not either a purchase or a sale. Such a morality fails to recognize the very real benefits that accrue to all of us when all in society are able to live healthy, safe lives as well-educated citizens, and that the taxes we pay are our investment in that kind of society.

# posted by

Robert Cook : 8:26 AM

robert cook said...

Hell, paying proportionately lower taxes than wage earners is one of the benefits they buy with the voice their wealth gives them.

Wage earners most certainly do not pay a greater proportion of their income in taxes than a Bill Gates.

Social security and medicare insurance contributions are not general taxes. Theoretically, this is money the tax payer withdraws again plus some when he or she retires.

In fact. the bottom half of earners pay a tiny fraction of their income in income taxes when compared to a Bill Gates. The lowest earners are actually eligible for EITC redistribution payments.

# posted by

Bart DePalma : 8:36 AM

fraud guy said...

Once more: lies, damned lies, and statistics

My friend, the point is how much of the cost of government the upper wage earners are paying, not how much they earn.

Taxes are not supposed to be used to punish the tax payer for creating "too much" wealth. They are supposed to equitably raise money to pay for commonly enjoyed government services.

# posted by

Bart DePalma : 8:40 AM

Bart, all your arguments presuppose perfect or near-perfect meritocracy. I recognize you believe that that presupposition is true. But if Brian's premise is true instead -- if prospects for financial success in the U.S. are at least as much a function of chance, and indeed of countermeritocratic forces, as they are a function of merit -- then what exactly is wrong with some form of downward redistribution?

# posted by

"Q" the Enchanter : 11:09 AM

drake:

You are equating making money with a meritocracy. Not everyone's goal is to make money, There are other things in life one can do well which will not provide a monetary return.

For example, I could make a great deal more money as a lawyer in a big city firm if I am willing to sacrifice the rest of my life to making money. However, I value my marriage and the opportunity to enjoy nature far more than money and instead am enjoying a decent middle class income in my own solo firm in the mountains.

My workaholic father who I rarely saw may actually have made more money at my age once inflation is factored in. However, I do not consider myself or the American Dream a failure if this is true.

The American Dream is all about the freedom to live life as we please. This freedom allows some folks to create fantastic amounts of wealth. More power to them if that is what they want to dedicate their lives to doing. It also allows folks like me to take other paths not dedicated to making money. And yes, it also allows people the freedom to make self destructive decisions which make it difficult to earn a decent living.

Folks like me or the people who make self destructive mistakes have no right to use the government's monopoly on force to rob the wealth creators of their hard earned money simply because we chose other paths. This is nothing less than envy motivated criminal theft.

# posted by

Bart DePalma : 11:26 AM

Bart, granted, people make lifestyle choices that don't prioritize chasing after the almighty dollar. But let's not change the subject. The issue is simply this: If market results routinely fail to track merit, why shouldn't there be some sort of compensatory mechanisms?

(Side Note: Sure, envy and resentment are real and deleterious psychological dispositions, and a lot of people unhealthily think the world owes them a grand living. That being said, it'd be pretty hard to argue that basic intuitions about fairness are grounded all and only in such traits.)

# posted by

"Q" the Enchanter : 12:13 PM

Drake:

There is no evidence that a free market does not reward merit. Indeed, the free consumer market for goods and services is perhaps the purest form of meritocracy available because the producer cannot compel the consumer to buy his product or any product at all. Rather, the producer has to convince the consumer that he or she needs the product and that the producer's brand is the best.

We have laws against monopoly, wrongful discrimination and fraud in order to make the market even more of a meritocracy.

Redistribution does absolutely nothing to make the market into a meritocracy. Rather, the underlying premise of redistribution (and theft) is that those who create more wealth than others do not deserve to keep the wealth they earned because it is somehow unfair to those who are not as talented as creating wealth.

# posted by

Bart DePalma : 2:00 PM

In reality, Gates is paying exponentially more than you for the same police protection, all for committing the sin of fulfilling most of the world's need for computer software.

He's not paying more because he committed a sin, he's paying more because he has a lot more to protect. Apparently in rightwingnut land we should all pay a set fee for house/car insurance, no matter how much our house/car is worth. After all, why should I be punished for the sin of being able to afford a nice car while Baghdad Bart is riding around in a AMC Gremlin because he invested all his earnings?

# posted by

Bartbuster : 2:20 PM

Robert Cook put it very well.

I would add only that another important stream of the American tradition (in addition to the individualist one celebrated by Bart) is that we are a community united for the common good. We each benefit in many ways from being members of this community, and we each have a return obligation to support the community. I don't see this complex of ideas reflected in Bart's views.

What kind of community do you want to be a member of? Every man for himself (and this does seem to be an attitude more often expressed by males), or, we're all in it together.

Brian

# posted by

Brian Tamanaha : 2:26 PM

Bart, it's long been clear that you disagree with the premise that market results are often (not always) unfair and capricious. That's why I've put the issue to you in conditional form. Twice. Which equals the number of times you've evaded it.

Given this record of conversational cooperation, I'm not surprised you prefer an ethic of competition!

# posted by

"Q" the Enchanter : 3:26 PM

drake:

You asked me whether I thought "market results routinely fail to track merit." I directly addressed that question with a resounding NO and gave my reasons. I further argued why redistribution/theft does nothing to advance meritocracy.

# posted by

Bart DePalma : 3:31 PM

garth sullivan said...

BD: In reality, Gates is paying exponentially more than you for the same police protection, all for committing the sin of fulfilling most of the world's need for computer software.

It could also be argued that in reality, Gates derived much of his fortune by ruthlessly, and in many people's eyes, illegally, squashing all competitors, thus, deriving his wealth, at least in part, by dominating a market and closing it off to innovation and fair competition.

I have been a Mac Guy since 1984 and am hardly a fan of Microsoft's products outside of the Office suite. However, what Gates lacks in product innovation, he more than makes up for with business savvy. Apple had their shot back in the late 80s, but made a series of bad business decisions. However, MSD got lazy and has not put out anything worthwhile in nearly a decade. Apple and others are offering the consumer alternatives and are making inroads into the market.

In the end, the market always works because we consumers get to make the decisions. You cannot say that about any political representative democracy.

# posted by

Bart DePalma : 3:37 PM

brian tamanaha said...

I would add only that another important stream of the American tradition (in addition to the individualist one celebrated by Bart) is that we are a community united for the common good. We each benefit in many ways from being members of this community, and we each have a return obligation to support the community. I don't see this complex of ideas reflected in Bart's views.

I am a libertarian, not an anarchist. I have nothing against the community providing widely shared community benefits for the community through government.

Government is a necessary evil because some community services can not or should not (security) be performed by individuals in the free market.

I am also enough of a realist to know that all people cannot be expected to pay the same amount of taxes even though they share community services equally because any individual amount of taxes which could be afforded by the poorest would not raise enough money. I also realize that there is always a measure of class envy in even the freest of societies which would not permit such a system.

If I were King, I would adopt either a FAIR tax paired with a revocation of the income tax or at least a flat income tax. However, I am not King and I realize that we Enterprisers who support such reforms are a minority of voters.

Redistribution of wealth based on a progressively punitive income tax system simply goes too far. Redistribution has nothing to do with the community providing community goods through the government and everything with a majority using the government to steal from a minority.

# posted by

Bart DePalma : 3:51 PM

"You asked me whether I thought "market results routinely fail to track merit."

No Bart. Read the question again.

# posted by

"Q" the Enchanter : 3:54 PM

Drake:

You asked: "If market results routinely fail to track merit, why shouldn't there be some sort of compensatory mechanisms?"

I took that as a two part question which resolved itself when I answered that markets are the purest form of meritocracy. That being the case, the second part of your question is moot. I am not going to assume the false statement that "market results routinely fail to track merit" is correct simply to get to the second part of your question.

# posted by

Bart DePalma : 4:41 PM

This comment has been removed by the author.

# posted by

"Q" the Enchanter : 5:59 PM

"You asked: 'If market results routinely fail to track merit, why shouldn't there be some sort of compensatory mechanisms?'

I took that as a two part question...."

The only problem being, of course, that "taking" something "as" something that it's not doesn't much help move the discussion forward.

# posted by

"Q" the Enchanter : 6:00 PM

Now just lies...

"My friend, the point is how much of the cost of government the upper wage earners are paying, not how much they earn.

Taxes are not supposed to be used to punish the tax payer for creating "too much" wealth. They are supposed to equitably raise money to pay for commonly enjoyed government services."

Then why did you point out that the percentage of taxes paid by the top 1% of income earners has doubled, while not also pointing out that their percentage of all income has also doubled? Failing to point out that fact was intellectually dishonest on your part, as your attempt to continue to obfuscate the issue proves.

If you truly wanted to discuss the fact that the tax on the top 1% is disproportionate, then you should have pointed out that their share of taxes should be equivalent to their share of income. Instead, you tried to obscure the issue by talking about nominal tax rates, and then failed to disclose that their effective rate has not changed (as I took the time and effort to do).

# posted by

Fraud Guy : 9:40 PM

fraud guy said...

Now just lies...

BD: "My friend, the point is how much of the cost of government the upper wage earners are paying, not how much they earn.

Taxes are not supposed to be used to punish the tax payer for creating "too much" wealth. They are supposed to equitably raise money to pay for commonly enjoyed government services."

FG: Then why did you point out that the percentage of taxes paid by the top 1% of income earners has doubled, while not also pointing out that their percentage of all income has also doubled?

:::sigh:::

Let's start from the top again...

shag made the ridiculous claim that the wealthy do not pay their fair share of taxes.

I responded with the stats demonstrating that the top half of earners pay nearly all of the income taxes, with the top 1% like Gates and Buffet paying a whopping 34.3 percent of all taxes, in return for the same exact services you and I enjoy. You may not like these facts, but that does not make them "lies."

Because the purpose of raising taxes is to equitably finance government services, the wealthy pay far, far, far more than their share for those services. Under this approach, how much the person earns is irrelevant to the discussion.

However, you appear to be wedded to the idea that the more wealth a person creates, the more the government should punish him or her with ever more punitive tax rates. Thus, your tunnel vision is only focused on how much the tax payer earns to the exclusion of any consideration of the wildly disproportionate amount he or she pays for the services returned.

# posted by

Bart DePalma : 10:27 PM

Bart,

sigh

From the top:

BDP: shag made the ridiculous claim that the wealthy do not pay their fair share of taxes.

I responded with the stats demonstrating that the top half of earners pay nearly all of the income taxes, with the top 1% like Gates and Buffet paying a whopping 34.3 percent of all taxes, in return for the same exact services you and I enjoy. You may not like these facts, but that does not make them "lies."

What you said was:

As of 2003, the the top 1 percent of taxpayers (where Buffett and Gates reside), ranked by adjusted gross income, paid 34.3 percent of all federal income taxes, the top 5 percent paid 54.4 percent, the top 10 percent paid 65.8 percent, and the top 25 percent paid 83.9 percent.

As a point of comparison, in 1980, when the top statutory income tax rate went up to 70 percent, the share of income taxes paid by the top 1 percent of taxpayers was just 19.3 percent.

You are stating (or at least strongly implying) that the top percentiles (especially the top 1%, since you explicitly compare their 1980 numbers vs. 2003) are paying too much in taxes. To drive home the point that this was the case, you brought up the point that the amount they are taxed has gone up even though their nominal tax rate has gone down.

However, you failed to point out that, during the same period of time that they have been subjected to this ruinous increase in taxes (having gone from paying 19.3% of all taxes to 34.3% of all taxes), they have also increased their portion of all income, going from about 7% to over 13%. Suddenly, their increase in tax liability does not come from some unstated, nefarious change in tax law, but from their increase of their share of all income. You, however, failed to disclose this exculpatory data from your "proof" that the top income earners are over-taxed. The data instead shows that they are still taxed at about the same proportion of their contribution to national individual income. That's why it's lying with statistics.

Now, to go to the actual tables, you can do the calculations, and you find the following (and going through the end of the data, which was 2005, not 2003).

(data derived from cbo.gov/ftpdocs/88xx/doc8885/Appendix_tables_toc.xls)

(pardon the formatting)
1979-2005
%ile/nominal change in income share/% inc share chg/nominal change in tax share/% tax chg
01-20/-1.8%/-31%/-1.3%/-62%
21-40/-2.6%/-23%/-3.1%/-43%
41-60/-2.5%/-16%/-3.9%/-30%
61-80/-2.2%/-10%/-4.1%/-20%
81-90/-0.8%/-5%/-1.7%/-11%
91-95/flat/flat/-0.2%/-2%
96-99/+1.6%/+14%/+2.0%/+14%
100/+8.8%/+95%/+12.2%/+79%

So what does that tell us; over the past quarter century, that the bottom 90% of households had their share of overall income shrink, the next 5% stayed flat, and only the top 5% of households increased their share of the pie; in fact, the top 1% more than doubled their share; very much in line with the tax numbers.

Now if we only go to the end of 2003, as you suggested:

1979-2003
%ile/nominal change in income share/% inc share chg/nominal change in tax share/% tax chg
01-20/-1.6%/-28%/-1.1%/-52%
21-40/-2.0%/-18%/-2.7%/-38%
41-60/-1.5%/-9%/-3.2%/-24%
61-80/-1.0%/-5%/-2.6%/-12%
81-90/-0.1%/-1%/-0.3%/-2%
91-95/+0.4%/+4%/+0.3%/+3%
96-99/+1.3%/+11%/+1.9%/+13%
100/+5.0%/+54%/+7.5%/+49%

Wow, now the whole top 10% improved their position, and the next 10% improved by staying flat. Why did you not choose the end point of the available data? Did the data not conform to your theory in 2005? Or were you trying to hide the fact that the top 1% went from having the same income as the bottom 25% to having as much income as the bottom 40% or so? Or that they have tripled their average income, while the bottom 4 quintiles have only improved their income by 1%, 10%, 15%, and 23%, respectively, and the capital income of those bottom 4 quintiles has all but disappeared?

# posted by

Fraud Guy : 4:17 AM

I made three early comments on this post, one referring to "lottery democrats" voting against their pocket books, a second referencing Warren Buffett and a third elaborating upon Warren Buffett by adding Bill Gates and the nouveau riche Lisa's brother. In returning to this post on "tax policy" by so many experts to find many, many subsequent comments, I note that Lisa's brother recently asserted:

"BDP: shag made the ridiculous claim that the wealthy do not pay their fair share of taxes."

I did not make that claim and if I had it would not be ridiculous. By my referencing Warren Buffett, etc, perhaps Lisa's brother assumed that I made such a claim. If I had the same fora available to me as Warren, I would indeed make the claim.

Who remembers "cheapskate" Jack Benny's response when Don Wilson said "You can't take it with you"

"Well, then I won't go."

Ah yes, death and taxes.

# posted by

Shag from Brookline : 8:29 AM

fraud guy:

I was demonstrating how much more the wealthy pay absolutely for the same government services. I never argued or even implied that the wealthiest 1% pay a greater share of income taxes now than they did in 1980 because their tax rates increased. You will hardly find this supply side disciple make that argument.

I am unsure why you chose the time frame of 1979-2005. If you wish to show the effect of the Reagan tax reforms, you need to start in 1982 when they took effect rather than including the deep Carter recession prior to the tax reforms.

These charts appear very similar to a variety of misleading statistics given by critics of the Reagan tax reforms. Fess up, where did you cut and paste these from?

In any case, after the advent of the Reagan tax reforms, every single quintile has increased its income. However, the reason that wealth exploded towards the top of the scale is the cut of the capital gains tax rate combined with all new IRA/401K tax protected investment vehicles. Freed from punitive tax rates on investments, America's investor class vastly expanded and the markets increased in value about thirteen fold since 1982. All this new investment wealth made the United States the fastest growing developed economy since 1982.

If the differential in wealth between the new investor class and everyone else disturbs you (and it should), then perhaps you will join me in calling for a diversion of a portion of social security and perhaps other monies into personal accounts so everyone can be part of the investor class. This win win solution is a far superior resolution than returning to the days of punishing investors leading to poor growth and frequent and deep recessions.

# posted by

Bart DePalma : 9:04 AM

To paraphrase the master of making "shite" up (h/t Arne):
"Fess up, where did you cut and paste these from?"

I don't know, maybe I referenced that information somewhere in my post (if someone took time to read through the information instead of trying to make their own points). I took the data from OMB and translated it so that the different impacts on segments within the top quintile were broken out. Basic analysis.

"In any case, after the advent of the Reagan tax reforms, every single quintile has increased its income. However, the reason that wealth exploded towards the top of the scale is the cut of the capital gains tax rate combined with all new IRA/401K tax protected investment vehicles. Freed from punitive tax rates on investments, America's investor class vastly expanded and the markets increased in value about thirteen fold since 1982. All this new investment wealth made the United States the fastest growing developed economy since 1982."

Of course, as you state, those benefits skewed heavily towards the top 1%, at the expense of the bottom 4 1/2 quintiles. Just as has been said by many a non-conservative pundit, any tax breaks have been overwhelmingly to the benefit of that top 10/5/1% of the population.

For example, using your preferred time frame of 1983-2003, the increases in income for my breakdowns above are 14%/20%/20%/24%/32%/39%/51%/97%. The bottom four quintiles all went up, and if you include the next 10%, they were all in a relatively small range. It is the top three categories (especially the top two) who had the major benefit of the tax code changes.

However, if we look at the changes since the last tax change (2003-2005), the income improvements are as follows:
1%/3%/4%/4%/5%/7%/14%/43%.

Compare this to 1982-1984:
-1%/2%/3%/3%/5%/8%/10%/21%

The Bush tax cuts are much more heavily skewed the top 5% (and 1%) of the country, even if they are marginally better for the bottom 60% of households in the country.

With regards to your preference to force people into investment vehicles controlled by the same institutions that brought us the internet bubble, the housing bubble, and other underegulated fiascos. The change in share of capital taxes as a percentage of all such taxes, over your time frame:
-65%/-63%/-51%/-43%/+16%/+26%/+34%/+53%.
I would hazard a guess that tax policies that benefit the top tiers do not assist the majority of households in the country add investment income. Maybe if we return to those "regressive" taxes of the past, the top tiers of society will have to cede some of their share of the investment pie back to the lower income households.

# posted by

Fraud Guy : 12:51 PM

fraud guy said...

To paraphrase the master of making "shite" up (h/t Arne): "Fess up, where did you cut and paste these from?"

I did not accuse you of making up anything. Your charts looked very similar to others I have seen in the past. If you did the analysis, more power to you. However, I am still curious why you are including the Carter recession with post Reagan tax reform period.

BD: "In any case, after the advent of the Reagan tax reforms, every single quintile has increased its income. However, the reason that wealth exploded towards the top of the scale is the cut of the capital gains tax rate combined with all new IRA/401K tax protected investment vehicles. Freed from punitive tax rates on investments, America's investor class vastly expanded and the markets increased in value about thirteen fold since 1982. All this new investment wealth made the United States the fastest growing developed economy since 1982."

Of course, as you state, those benefits skewed heavily towards the top 1%, at the expense of the bottom 4 1/2 quintiles. Just as has been said by many a non-conservative pundit, any tax breaks have been overwhelmingly to the benefit of that top 10/5/1% of the population.

Stuff and nonsense.

1) Economics is not a zero sum game. The fact that investors are successful does not mean that this success came at anyone else's expense. Indeed, all of this investment created the millions of new jobs everyone is enjoying.

2) The 1981 Reagan tax reform reduced tax rates across the board by 25%.

3) The 1987 Reagan tax reform reduced tax rates further and eliminate most of the deductions which the wealthy enjoyed.

For example, using your preferred time frame of 1983-2003, the increases in income for my breakdowns above are 14%/20%/20%/24%/32%/39%/51%/97%. The bottom four quintiles all went up, and if you include the next 10%, they were all in a relatively small range. It is the top three categories (especially the top two) who had the major benefit of the tax code changes.

Much better. Thank you for crunching the numbers for most of the correct time period. I would only observe that the inflation figures for the 80s and into the early 90s were overstated before the government started using alternative products in their scoring. The real growth is actually higher since 1983.

However, if we look at the changes since the last tax change (2003-2005), the income improvements are as follows:
1%/3%/4%/4%/5%/7%/14%/43%.

I do not know if you can break down the figures by month, but the post tax cut Bush Boom started in the middle of 2003 and you are missing nearly two years of that boom. Indeed, the GDP grew 4.9% the last quarter in what is supposed to be a slowing economy.

Compare this to 1982-1984:
-1%/2%/3%/3%/5%/8%/10%/21%

The country was crawling out of the worst recession since the Great Depression and the highest inflation ever at that time and was just hitting its stride in 1984.

The Bush tax cuts are much more heavily skewed the top 5% (and 1%) of the country, even if they are marginally better for the bottom 60% of households in the country.

Hardly. The biggest beneficiaries of the Bush tax rate cuts were two earner married couples and families with dependent children. Their tax rate cuts were greater than the fractional reductions in the tope rates.

# posted by

Bart DePalma : 1:32 PM

First; I provided the location of my data in the first post. It is only broken out by year, based on tax and income data. Month by month detail was not provided, and would not likely provide useful at this level.

And now why I called my initial post lies, damned lies, and statistics:

"The biggest beneficiaries of the Bush tax rate cuts were two earner married couples and families with dependent children. Their tax rate cuts were greater than the fractional reductions in the tope[sic] rates."

That conclusion is not based on this data. It may be true within brackets, based on tax rates, that two income households received more of a benefit than single income households, but that was not the overarching point I was making. I was using the data to show how various income strata were impacted by the tax cuts, in response to your claims.

Households in the bottom 90% had positive growth, but nowhere near that of the top 10/5/1% (whose improvement far exceeded those of the other brackets). The numbers don't lie in that respect. I'll repeat it: the income of the top 1% improved dramatically over those of other percentiles. They were the real net beneficiaries of the changes in the tax codes, to the point that 1% of the population represents (in 2005) over 18% of the income, up from about 9%.

Going back to the original point of this thread, what does that mean. Looking at the min/max amounts of income by the quintiles, over your period of time (1983-2003), here is the net effect by annual income:
bottom quintile (1-20%)
$0-$17,399 income--14% increase in income.
next quintile (21-40%)
$17,400-$29,499--20% increase in income (poverty level falls somewhere in here)
middle quintile (the middle class) (41-60%)
$29,500-$43,299--20% increase in income
middle high quintile (61-80%)
$43,300-$64,999--24% increase in income
top quintile
first decile (81-90%)
$65,000-$87,299--32% increase in income
next five percentiles (91-95%)
$87,300-$116,499--39% increase in income
next four percentiles (96-99%)
$116,500-$253,599--51% increase in income
top percentile
$254,600+ -- $97% increase in income

That top percentile more than tripled my bracket's increase in income over that time; how well did yours do? Even though all brackets improved, who benefited the most? Not the middle class. Not the lower class. Not 90%+ of American households. Cui bono?

Which is the point that seems to elude you. Even if you were part of a two income household, the big bang was reserved for those families making over a quarter million a year, while over other various periods of time (including the overall 1979-2005 data that was available to me), the numbers were even more skewed to the top percentile. I made no other claim than that, other than that it appeared that the changes in the tax codes (and overall income distribution) apparently made it less likely for the bottom 80% of the population to share in investment income.

# posted by

Fraud Guy : 5:08 PM

fg:

Here are some facts of life:

1) No one ever became rich working for someone else or receiving a government check.

2) You can only make real money by running your own business or investing in other people's businesses.

3) Anyone can invest money and become wealthy - anyone. If people could invest their SS taxes in a simple low fee stock index account, they would all be millionaires when they retired rather than worried about making ends meet on SS.

Better yet, if they spent some time learning how to invest in individual stocks, they could be multi-millionaires. For example, I earned nearly 70% ROI on individual stocks this year. Sure there are bear markets, but you can earn returns then as well. I wasted a great deal of time waiting to start investing, but I still plan to end up a millionaire by the time I retire.

This is how the lower quartiles join the upper quartiles.

My solution to the income differential is to give more people the opportunity to become rich and get closer to the upper quartiles.

Your solution appears to be to steal from the successful so they get closer to the lower quartiles.

The American Dream is all about the former, not the latter.

# posted by

Bart DePalma : 11:51 PM

Some other facts of life:

3) Anyone can invest money and become wealthy - anyone. If people could invest their SS taxes in a simple low fee stock index account, they would all be millionaires when they retired rather than worried about making ends meet on SS.

Because stocks always go up, and when everyone is a millionaire, we'll all be rich, and no one will have to work for anyone else?

If your interpretation of how to achieve the dream were so attainable under current (or proposed) conditions, then we'd have a lot less congregation of wealth at the top already. After almost 25 years of improved conditions for investment (that is your claim about the tax cuts, correct?), only those (in the vast majority of cases) already in the investor class have been able to capitalize on the benefits, while the bottom 80% of US households have been gradually excluded from the opportunity.

# posted by

Fraud Guy : 12:37 AM

Lisa's brother still plans to be a millionaire when he retires. Defining a "millionaire" is of course critical to his dreams. For instance, is a "millionaire" one who has annual income of at least $1 million or one who has net assets in excess of $1 million, or some combination of both? Since Lisa's brother has a long way to go before he retires, what will "millionaire" mean, say, some 20 years or so from today?

# posted by

Shag from Brookline : 8:16 AM

fraud guy said...

BD: 3) Anyone can invest money and become wealthy - anyone. If people could invest their SS taxes in a simple low fee stock index account, they would all be millionaires when they retired rather than worried about making ends meet on SS.

Because stocks always go up, and when everyone is a millionaire, we'll all be rich, and no one will have to work for anyone else?

1) Stocks have always gone up over the time span of an average working life. If you invest steadily during the down times, the gains you will get from these cheap stocks when they rebound is far more than anything you might have lost buying a stock at a peak.

2) The key to getting rich while investing a moderate amount is to maintain the flow of investment and not to withdraw the money during your work life. So, we still have to work. However, you may be able to retire early.

After almost 25 years of improved conditions for investment (that is your claim about the tax cuts, correct?), only those (in the vast majority of cases) already in the investor class have been able to capitalize on the benefits, while the bottom 80% of US households have been gradually excluded from the opportunity.

Nothing is excluding the average person from investing. Indeed, it is ridiculously simple in the age of the internet brokering. I can manage my portfolio in about 30 minutes a week.

shag, millionaire will mean less in 20 or so years from now, but will still be several hundred thousand more than SS.

# posted by

Bart DePalma : 9:08 AM

In the interest of rounding out the possibilities, we should also mention the possibility that a fair number of Americans are demonstrably insane. To be fair, the line between optimism and insanity is one that can be crossed with ease.

To whit: "No one ever became rich working for someone else or receiving a government check."

In fact, the most certain way to get rich is to become the CEO or a senior officer of a large public corporation, stuff the board of directors with your friends, and reap the benefits, while the company loses money hand over fist and the stock tanks, taking with it all the savings of the little investors and employees.

Another good way to become fabulously wealthy is to rise to a senior position in the government, whether through the executive or legislative branches, then quit and become a lobbyist.

For every Bill Gates or Warren Buffet, there are 1000 people who became wealthy by working for others -- and several thousand who lost a lot of money trying to run their own company or invest in start-ups.

"Anyone can invest money and become wealthy - anyone. If people could invest their SS taxes in a simple low fee stock index account, they would all be millionaires when they retired rather than worried about making ends meet on SS."

Yes, sure, because, between 2000 and 2007, typical index funds (russel3000, S&P500) have increased in value from 101 to 102 today. At that rate, the small investor who puts 100000 into them will only have to wait a few hundred years for their million-dollar return.

Over the last ten years the rate of return of the average index fund has barely outpaced inflation. Over the longer term, the rate of return will be better (we hope) but Bart's assertions are simply impossible to justify with any rational basis.

Hence, I submit that innumeracy and irrationality are more proper "first causes" for American optimism (or suckerhood.)

# posted by

C2H50H : 1:34 PM

c2h50h:

1) I am glad you share my disgust with government corporate welfare. However, that is not a paycheck.

2) Your measurement for index funds started at the top of a bubble to the present. SPDR funds have increased 50% since 1997. As a point of comparison, a retiree today can expect about a 2% total lifetime ROI on her SS, while folks like me who will retire at the ass end of the boomer can expect to lose money as they freeze or cut unaffordable benefits.

# posted by

Bart DePalma : 3:13 PM

Bart,

Tell us when the next bubble will occur, so we can all cash out at the right time -- otherwise, if we have to cash out in the middle of a long bear market, we may not make the profit you promised.

To base your own investment strategy upon a continued growth in the stock market is simple order-1 estimation, and sensible.

To assert that this investment strategy is wise for everyone is to parrot the advice of Wall Street, and a bit gullible (in short, being a "sucker").

To hope that this strategy will make you wealthy in the absence of any other is excessively optimistic.

To believe that this strategy will make you wealthy is wishful thinking.

To assert that this strategy will produce a particular result for everyone is delusional.

And it's much worse than you think. The run-up in the stock market has been largely fueled by the steady, large-scale purchases of boomers through their IRA's and 401-K's. As they switch from investment to disinvestment, the stock market may stagnate for at least 10 years.

Now, you have a good day.

# posted by

C2H50H : 4:54 PM

The president and founder of the company I work for refers to investing in the stock market as the bigger idiot investment strategy. You will make money only if you can find a bigger idiot to buy the stock from you.

I know there are probably a lot of Barts out there, but I'd hate to bet my retirement on it.

# posted by

Bartbuster : 10:12 PM

One last comment (hopefully); the other portion of private investment option that bothers me is that, in order for everyone to have that (hopefully not inflation degraded, or market downturn eroded) million, the estimates on a moderate return from some investing options I've seen is about $5K a year for 25-30 years. Assume some wild oats, and starting to save/invest around 30, you are still asking about 70% of the households to save more than 10% of their income for over 30 years. And they can't hit catastrophic illness, divorce, criminal prosecution, or bankruptcy during that time (or prolonged unemployment, etc.). Get hit by one drunk driver and be left with a long-term disability, lose your job in a hard to find specialty, lose half your joint possessions and $100k in attorney's fees in a divorce, and watch your investments get yanked to pay for day to day living. Then, the next 10-15% or so is probably vulnerable to all of the above if extended or badly timed. So that puts us at under 20% of the population who can do the Bart and be prepared for all future eventualities and still retire rich.

Plus, there are many, many people who don't want to take that risk, and prefer the concept of a steady safety net under it all. That's why it's not called social insecurity, and why all investors hear those "past performance is no indication of future results" warnings.

# posted by

Fraud Guy : 2:46 AM