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Tilting at Windmills

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June 16, 2006
By: Kevin Drum

WORST PRACTICES UPDATE....The latest news from Europe:

Along with hip-hop and Hollywood movies, Europeans are eagerly importing another American phenomenon: soaring pay packages for chief executives.

Terrific. We're in the process of importing their brain dead immigration policies and they're in the process of importing our brain dead executive comp policies. You'd think there were no good ideas left in the world, or something.

Kevin Drum 2:03 AM Permalink | Trackbacks | Comments (127)

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Comments

Totally OT, but tbrosz is alive and well and just as dishonest as ever, over at John Cole's place. I guess he doesn't love us anymore.

Posted by: craigie on June 16, 2006 at 2:04 AM | PERMALINK

In both cases, the market is working. If executive compensation were truly too high, then those corporations that didn't overpay their executives would have an advantage, because they would pay less for labor expenses. The fact that all the most profitable corporations have highly paid executives indicate that executives are worth it.

If you want, you're welcome to do business with corporations that pay their executives only a few hundred thousand a year. you have to ask yourself though: If some executives are getting millions, will the best or worst be attracted to the low paying jobs?

Food for thought.

Posted by: American Hawk on June 16, 2006 at 2:13 AM | PERMALINK

What you have to ask yourself is, does paying someone a zillion dollars make him more talented?

Study after study says no. High executive pay is just another manifestation of gaming the system.

Posted by: craigie on June 16, 2006 at 2:24 AM | PERMALINK

You'd think there were no good ideas left in the world, or something.

The Bilderbergian Order of the Eleventh Trilateral Roman deems it so.

Posted by: exasperanto on June 16, 2006 at 2:26 AM | PERMALINK

Thanks for the tip.

Posted by: tbrosz on June 16, 2006 at 2:26 AM | PERMALINK

Europe has always lagged but never failed to follow the best US practices. See the latest on obesity and fast food consumption to see how worked up the Euros are getting on this subject. At least they lead us on awareness and reaction. The UK is debating banning fast food advertising before 9 PM putting it on the same obscenity level as a naked (if artistically valid) breast. Yes, that includes Benny Hill and present day equivalents. We are soooo prudish.

On Exec pay there has been more public reaction and greater shareholder questioning in Europe than here in the US for some time, even though pay ratios are still a fraction of the US Fortune 500 CEO/worker's pay ratio of 440:1.

It's hard to argue that the US does not lead the world in moral obscenity.

Of course, not just in pay.

Posted by: notthere on June 16, 2006 at 2:31 AM | PERMALINK

Food for thought.

Posted by: American Hawk on June 16, 2006 at 2:13 AM | PERMALINK

No basis as usual.

In 1980 Fortune 500 execs were paid 45:1 over their workers average pay. The acceleration of US CEO's pay has been across the board, including underperforming or even loss-making companies. On the international stage the equivalent people have mostly been paid less than US CEOs and yet, in many cases, have outperformed the US companies.

Lets compare Toyota or Honda or BMW to GM or Ford or Chrysler. Don't feel comfortable with that, pick a reasonably broad industry, not a Gates-type individual. I think you'll find the US CEOs get paid huge amounts of money even if their company is in the tank. Airlines?

Dummy. It's sheer greed where the monkeys control the bananas.

Posted by: notthere on June 16, 2006 at 2:42 AM | PERMALINK

Good stuff notthere. Of course, those funny "fact" thingys are wasted on people who just think in bumper stickers. Did I say "think"? My bad.

Posted by: craigie on June 16, 2006 at 2:46 AM | PERMALINK

"...the equivalent people have mostly been paid less than US CEOs...."

should have read:

"...the equivalent people have mostly been paid way, way less than US CEOs...."

Posted by: notthere on June 16, 2006 at 2:49 AM | PERMALINK

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Posted by: cxmmc on June 16, 2006 at 3:19 AM | PERMALINK

I'll grant AH this: Those who appoint the CEOs are singlemindedly focused on maximizing profit for the shareholders, that's just the way capitalism works. Now, wouldn't it be a bit odd to hire someone who did not focus on maximize his/her own profit?

Apart from that, what continues to amaze me is that people good for millions of dollars insist on being paid even more millions. I mean at some point one would think that spending more money becomes pointless. Like giving a huge yacht to someone who already owns one? (http://www.mosnews.com/news/2006/06/13/present.shtml)

Kudos to the Bill Gates approach: Spend the first half of your life amassing a huge fortune, then use the other half of your life working out how to give it back to those in need.

Posted by: OmniDane on June 16, 2006 at 3:42 AM | PERMALINK

I'm not sure Europe is tracking us that closely with respect to obesity. The French remain resolutely trim. The Viennese run a bit saftig, but outright obesity is rare there, but all too common here. Likewise in Amsterdam and Copenhagen; the middle-aged tend to be overweight, but they're still able to walk on their own.

Posted by: bad Jim on June 16, 2006 at 3:50 AM | PERMALINK

bad Jim --
I didn't say tracking closely, more trending our way. Visually, visiting from the US, they seem pretty slim. Read their health figures; they know what is going on.

OmniDane --
The USA is home to the idea that money measures worth. It's an end in its self. This year x is worth or paid less than y. Next year vice versa. x believes (s)he is a winner. None of it has any relationship to performance. That's why there is no statistical correlation. Not in the USA. Even less so internationally. So culture plays a big part.


Maybe someone would broaden this discussion.

Not really in my area of knowledge but the UK seems to be ahead of us in making companies aware of their enviro' policies (as is much of Europe) as well as criticising exec pay. Japan has a much more egalitarian culture in terms of pay. Germany has worker/union reps on the board (shareholder representation too?) to help oversee exec pay as well as company policy.

There are cultural and administrative reasons why other countries will be slow or incapapable of following this US extravagance. What are they?

Is it solution or cause? US business schools have been pouring out the best and the brightest in droves; increasing numbers for 30 years. In most sectors the US is less dominant or competitive now than then. But the industry leaders take hugely greater remuneration. Seems to me obvious that CEOs are not 10 times better than they were 25 years ago. What could be done here for more realistic pay/reward?

Posted by: notthere on June 16, 2006 at 4:19 AM | PERMALINK

And as Europe becomes more multicultural, or rather stops living in denial about the fact that it already has become more multicultural, it will import America's pitiless policies toward the poor, and criminals.

This is the peculiar insanity of where we are. You become a de facto defender of racialist societies in order to defend humane welfare state and criminal justice policies.

Meanwhile, the disingenous apostles of Planet America over at TNR and the Economist get to chide the French and Dutch for white supremacy while saying nothing about the ugly underbelly of American-style laissez faire capitalism and racial and ethnic pluralism: rising crime, the breakdown of social cohesion and families, the increasing disregard for the poor and incarcerated.

Who wants to talk about the nearly two million Americans in prison? They did it to themselves right? Who wants to talk about the fact that conditions in American prisons are worse than anywhere in the west, and worse than in some developing countries? Who wants to talk about the tens of millions of Americans who live at or below the poverty line, especially the real hard luck cases, who don't respond to "care" not "cash"?

Posted by: Linus on June 16, 2006 at 4:43 AM | PERMALINK

The fastest way to bring down the ruinously high pay packages that executives recieve would be to put an elected representitive of the company's employees on the board with the power to veto executive compensation proposals. Having the best possible management for the company is very much in the interest of its employees. Give them a real voice in the decision making processes on the board. This would create a better balence of power between capital and labor in the running of the company.

Posted by: joe on June 16, 2006 at 4:45 AM | PERMALINK

joe --
if that's the route to go then probably more than one. Do they get all the perks of the usual directorships?

Linus --
depressing but I can't disagree. However, the US has seemingly suceeded in making Black America a permanent underclass. If they try to do the same with Hispanics/S.Americans there could be a real tinderbox. Paris, nothing.

As to The Economist, I've been reading it for over thirty years. There was a day it was definitely a leftie magazine (and I mean leftie) but with ideas. Now the journalism is puerile, devoid of originality and seemingly recruited from AEI. But, then, who owns it now? Sad days. Another nail in the coffin of diverse and intelligent media.

Posted by: notthere on June 16, 2006 at 5:20 AM | PERMALINK

joe --
if that's the route to go then probably more than one. Do they get all the perks of the usual directorships?

Linus --
depressing but I can't disagree. However, the US has seemingly suceeded in making Black America a permanent underclass. If they try to do the same with Hispanics/S.Americans there could be a real tinderbox. Paris, nothing.

As to The Economist, I've been reading it for over thirty years. There was a day it was definitely a leftie magazine (and I mean leftie) but with ideas. Now the journalism is puerile, devoid of originality and seemingly recruited from AEI. But, then, who owns it now? Sad days. Another nail in the coffin of diverse and intelligent media.

karta pojazdu

Posted by: Karta Pojazdu on June 16, 2006 at 6:18 AM | PERMALINK

joe --
if that's the route to go then probably more than one. Do they get all the perks of the usual directorships?

Linus --
depressing but I can't disagree. However, the US has seemingly suceeded in making Black America a permanent underclass. If they try to do the same with Hispanics/S.Americans there could be a real tinderbox. Paris, nothing.

As to The Economist, I've been reading it for over thirty years. There was a day it was definitely a leftie magazine (and I mean leftie) but with ideas. Now the journalism is puerile, devoid of originality and seemingly recruited from AEI. But, then, who owns it now? Sad days. Another nail in the coffin of diverse and intelligent media.

zwrot akcyzy

Posted by: Karta Pojazdu on June 16, 2006 at 6:20 AM | PERMALINK

joe: "The fastest way to bring down the ruinously high pay packages that executives recieve would be to put an elected representitive of the company's employees on the board with the power to veto executive compensation proposals"

That's an approach to obscene pay that I haven't heard before and it has the beauty of being easy to implement. Part of the problem is that most Americans have no concept of how much money is being concentrated in the hands of a few and have even less voice to stop it. Your suggestion would address that--but I also agree with notthere that boards would need more than one employee member, conformity being what it is.

I wonder what the "good" ideas are? "Good" and "bad" ideas are partly contextual. It is a good idea to reward people for their contributions. It is a bad idea to reward one person excessively for the contributions of the many. It is a good idea to encourage people who will contribute to our society to move here. It is a bad idea to attack those who differ from your tribe.

It seems to me that some bad ideas--obscene pay for a few corporate executives is one--can be traced to unregulated capitalism. Any society that embraces the concept that greed is good, bigger is better and that people (and the government of, by and for the people) are just "human resources" to maintain the bottom line is bound to run into trouble sooner or later. Capitalism succeeds best when societies are self-regulating, willing to accept constraints to ensure quality of life.

Against capitalism, we have the forces of human tribalism. The more heterogeneous the society, the less people want to contribute to the common good and the more likely that they will tolerate policies that allow a few (possibly their tribe!) to become excessively rich at the expense of the many (who are not part of "my" tribe.) When tribes start competing for scarce resources and cultural dominance, violence follows.

America is adopting immigration policies that are brain-dead only from the view of unregulated capitalism. Another way to state this is that Americans are asserting their desire to live in a homogeneous culture, not work harder for less pay, not live in global turmoil. Likewise, Europe is adopting American style executive compensation -- and the values of every man for himself -- as their societies adapt to the reality of higher levels of heterogeneity and competition.

Posted by: PTate in MN on June 16, 2006 at 6:27 AM | PERMALINK

The tax implication of the Eurpoean pay structure are quite different. A good percentage of the higher compensation goes straight into the government coffers.

Why wasn't this covered in the NYT story? Lazy and poorly schooled reporters.

Nothing new.

Posted by: racersave on June 16, 2006 at 7:59 AM | PERMALINK

PTate,

The idea is a pretty old one. I first heard it suggested back in the 70's. If the rep. had true veto power over executive pay packages, he wouldn't need anyone else there for moral support. By elected, I mean that the rep. would have to be a non-executive employee of the company in question elected by fellow non-executive employees. To give continuity, having the election once every four or six years (with the position garunteed with board member perks whether or not the person was fired by the company) would weaken the pressure that the other board members could bring while making sure that the person would be answerable to the employees represented.

Posted by: joe on June 16, 2006 at 8:08 AM | PERMALINK

tbrosz is alive and well and just as dishonest as ever, over at John Cole's place

None of which, of course, comes as a surprise.

Posted by: Gregory on June 16, 2006 at 8:17 AM | PERMALINK

"You'd think there were no good ideas left in the world, or something."

More like no honest politicians left.

Posted by: Hedley Lamarr on June 16, 2006 at 8:29 AM | PERMALINK

I would think that hip-hop and Hollywood movies would be far worse for society than high executive compensation. Why not inspire kids to become a highly effective well paid member of society rather than a pimp, ho or a gay cowboy.

Posted by: Jay on June 16, 2006 at 9:04 AM | PERMALINK

Yeah, the western world needs more social stratification and the promotion of a de facto aristocracy. [sarcasm]

Your point is well taken Jay, I don't see why actors or professional sports players should be paid so highly either. Or university presidents for that matter.

That's a great idea, American Hawk. Anyone have a list of companies with relatively low-paid execs?

Posted by: Librul on June 16, 2006 at 9:36 AM | PERMALINK

The answer to this outrageous crap: by law, tie executive compensation to worker wages and compensation. Set a number, say 75x. That is amount of executive pay allowed, max, over average worker pay before tax penalties ensue. If the corporation wants to increase the exec salary then they must increase the worker salary so as to maintain the average 75x. The corporation wants to go beyond 75x? Fine, just eat the tax penalties.

You want to give an exec a huge-ass golden parachute? Then you have to offer an improvement to the workers health and pension plan as well. If you want to cut worker pay (or number of workers) or worker benefits, then you have to cut exec pay and benefits.

No more incentive for driving wages through the floor for the only people that produce anything (the workers) vs those that do nothing (execs). No more incentive for outsourceing (the proportionate wage number holds regardless of who or where you hire. As a matter of fact, if you want to pay workers in a foreign, low-wage country prevailing wages in that country, then you are STILL tied to the 75x rule. You have to significantly cut exec pay. Boom. No more incentive to outsource for slave labor.

Posted by: Praedor Atrebates on June 16, 2006 at 9:55 AM | PERMALINK

I'd actually be content to let the market decide executive pay if we were to mitigate it on a social and macroecenomic level through a moderate but effective system of progressing income and estate taxes. But we are throwing that out at the same time exec compensation is skyrocketing.

Every day we look more like a South American ploutocracy, with the uber-rich living out their lives in gated luxury, rarely coming in contact with the unwashed masses. Do people really want to live like that, even if they see themselves being on the upside? How can anyone think that that is what America is all about?

Posted by: Viginia Dutch on June 16, 2006 at 9:57 AM | PERMALINK

".....those that do nothing (execs)..." Praedor

Obviously Praedor has never been an executive.

Posted by: Jay on June 16, 2006 at 10:10 AM | PERMALINK
We're in the process of importing their brain dead immigration policies and they're in the process of importing our brain dead executive comp policies.

Well, the nature of the marketplace makes it necessary for them to increase executive pay so that the good executives aren't lured to American firms; that's the beauty of global markets.

OTOH, nothing compels us to adopt their demonstrably failed approaches to immigration, we're doing that on our own free will.

But of course, our leaders are adamantly against adopting anything even remotely resembling their healthcare policies. We only adopt European ideas that are proven failures.

Posted by: cmdicely on June 16, 2006 at 10:19 AM | PERMALINK

Obviously Praedor has never been an executive.

Actually, and by definition, I AM such. Just not a CEO, CFO, or other career criminal. I am an officer in the military (reserves now). That makes me, with my rank, upper management. That means LOTS of paper shuffling and pencil pushing. As a civilian, I am a senior scientist in a lab and manage the lab (purchasing, planning). I am a midlevel exec. We do less than those that actually work.

Sorry, but an auto company doesn't do squat without the workers actually building/designing the autos. The Execs sit and shuffle paper, spout noise at shareholder meetings, and plot out ways to increase THEIR pay at the direct expense of workers. They plot to gut worker compensation in order to, short-term, drive up share prices (so they can jack up their compensation at the expense of the workers).

Same goes at all tech companies, all manufacturing, all retailing corporations. That said, it doesn't matter what you think about execs and how much you want to suck their little bitty penises. The correct way to fix everything while still paying well (enough) is to directly tie exec compensation to worker compensation. No outs (without penalties in the form of taxes). You are still free to get rich, you just can't be obscene about it and have to actually return value to the workers that make the whole thing possible.

Sorry, but if a corporation is doing so well that it can afford to dump $100s of millions on execs, it can easily afford better benefits for the guts of the company (the workers) while still getting a slightly moderated greed feed for execs. The execs still have their mansions, sail boats, 2nd, 3rd houses...they just have to think a little more about buying that 4th house or 10th Rolls.

Raise ALL boats, not just the exec's. Raise all boats proportionately. Aristocracy is a sure fire way to bring out the pitchforks and lynch mobs (or guns). Go too far into Dickensonian hell the way we are and I'll be more than willing to join with the mobs to moderate the disparity.

Posted by: Praedor Atrebates on June 16, 2006 at 10:23 AM | PERMALINK

f you want, you're welcome to do business with corporations that pay their executives only a few hundred thousand a year. you have to ask yourself though: If some executives are getting millions, will the best or worst be attracted to the low paying jobs?Food for thought.Posted by: American Hawk on June 16, 2006 at 2:13 AM | PERMALINK

"Doing business" is irrelevant. What is relevant is whether or not to invest. As a potential shareholder, I would want to know what ROI, Retained Earnings are, and whether or not the CEO is going to be a drain in X number of years. Corporations are so short sighted -- getting excited from quarter to quarter....In the end, the big question is: What is the opportunity cost of signing this huge contract? Winners in the opportunity cost game are exceptions to the rule. Yeah, we can all point to one or two, but overall, the shareholders hold more than shares. They are left holding the bag.

Posted by: the atom bomb of courteous debate on June 16, 2006 at 10:30 AM | PERMALINK

If anything the steep progressive tax rates of the 50s through the 70s made executives less likely to increase their pay outrageously because the government would just take a bigger chunk.

Those days are long gone.

Posted by: ChrisS on June 16, 2006 at 10:31 AM | PERMALINK

you have to ask yourself though: If some executives are getting millions, will the best or worst be attracted to the low paying jobs?Food for thought.

Actually, you have to ask yourslef: if the best executives are getting millions, will the best or worst be attracted to the high paying jobs? The high paying jobs wil, of course, attract everyone, the best and worst alike, precisely because of their high pay, so the high pay by itself fails to act as an efficient filter.

The truly talented are attracted by the work, by the chance to do good work and perform at their peak. The merely greedy, stupid and/or lazy are attracted by the money.

Posted by: Stefan on June 16, 2006 at 10:37 AM | PERMALINK

"We" is being used in two senses. "We" the people are changing our immigration stance. But, "they" the stockholders are choosing to pay CEOs huge sums. (Or, if you like, the Boards of Directors, who are the stockholders' representatives, are making this decision.)

As a citizen, I share the impact of our country's immigration policy. However, when stockholders choose to overpay their CEOs, the cost comes out of their pockets. They have a legal and moral right to make this decision (although I disagree with them.)

There are lots of people I think are overpaid, ARod, Ann Coulter, and Barbra Streisand, to name a few. I think these people make too much money, but it's not my call.

Posted by: ex-liberal on June 16, 2006 at 10:40 AM | PERMALINK

Of course, the solution is simple: we should simply outsource all our CEO and other high-level executive jobs to India and China. I'm sure we can find an Indian CEO willing to do the job for a mere hundredth of what we'd have to pay an American. After all, many American companies have already moved their nominal headquarters overseas to avoid taxes -- why not all the way and move all the execs, too, and follow their stated goal of becoming truly global companies?


Posted by: Stefan on June 16, 2006 at 10:41 AM | PERMALINK

The truly talented are attracted by the work, by the chance to do good work and perform at their peak. The merely greedy, stupid and/or lazy are attracted by the money.

And thus we get Enron, Michael's, the Banking scandal, book cooking up the ying-yang, layoffs up the ying-yang while the entire basis of the economy (the people) get shat upon and begin to whither. You end up super-high pay for execs doing nothing but wrist-slitting their corporations (and the overall economy) for the sake of quarterly share prices.

We need to get back to the most productive periods in history vis a vis tax policy: the 50s through 70s.

Posted by: Praedor Atrebates on June 16, 2006 at 10:43 AM | PERMALINK

I saw a variant of this in my field, law, a few years ago. Back in the mid-90s the opening salary for a first year lawyer at a top New York firm was somewhere around $83,000. But then the late 90s Wall Street/tech boom took hold, and firms started losing people to the Street and Silicon Valley, where they could make much more money. The result was a pay race to the point where these days, a mere ten years later, the average salary is about $145,000 for a young lawyer his first year out of school.

Of course, despite the rather large pay increase the first year lawyer in 2006 isn't really that much more valuable than the first year lawyer in 1996 -- firms have just had to pay them more as a sort of placeholder. The same dynamic works in increasing executive compensation.

Posted by: Stefan on June 16, 2006 at 10:51 AM | PERMALINK

".....those that do nothing (execs)..." Praedor

"Obviously Praedor has never been an executive."

And obviously Jay wasn't paying attention to Ken Lay's defense in his recent trial. ("WHAT offshore entities?")

Posted by: Lex on June 16, 2006 at 10:54 AM | PERMALINK

High executive pay is justified when the executive performs well: record profits, huge increase in market share, innovation in management. All show good leadership and should be rewarded.

The problem is that this is not the reality of executive pay. Case #1 is Michael Eisner, who got record bonuses in years when Disney stock plummeted (as in lost 50% of its value) and other performance indicators were lackluster at best.

The problem is board independence. Most of the board members (who set the CEO salary) were beholden to Eisner in some way. They paid him a fortune no matter what he did. The same situation is replicated all over the world.

So, as, usual, American Hawk is wrong. The market is not determining executive pay. If it was, poor performing executives would not be paid well. They would also make more money for long term growth of the firm, rather than for mass layoffs that boost the stock price right now, but gut the productive core of the company.

Unsurprisingly, if you can set your own salary, you set it really really high and try hard to divorce it from performance. CEOs set their own salary and load the boards with cronies to divorce performance from pay.

So, yeah, let the market set CEO salaries. CEOs should have to submit sealed bids to firms stating what they would accomplish and how much their pay would be. The firms could then pick the best person for the lowest price, just like any other worker or vendor. If they fail to accomplish their goals, there should be severe financial penalties. Stock options were concieved as a method to do this but the end result is that CEOs now rely on stunts to boost stock price but ignore the general health of a firm (I'm looking at you, GM). Even worse is that firms fight hard to not declare Exec compensation on their balance sheets, which directly harms shareholders.

They are just responding to market incentives. Change the incentives and results will happen pretty quickly.

Posted by: Alderaan on June 16, 2006 at 10:55 AM | PERMALINK

As a citizen, I share the impact of our country's immigration policy. However, when stockholders choose to overpay their CEOs, the cost comes out of their pockets. They have a legal and moral right to make this decision (although I disagree with them.)

Believe me, as a citizen you also share the impact of the creation of a super-wealthy class. A situation in which the rich get richer while the poor get poorer, enabling the rich to have disproportionate impact by buying up the votes of the legislators, is not a healthy one for a democracy.

Posted by: Stefan on June 16, 2006 at 10:55 AM | PERMALINK

There is something else that is interesting about Japanese executives. They move them around all the time. It's not considered to me in their best interests (or the company's) to stay in the same position or same location for very long. Staying put breeds complacency and keeps the company message from reaching the greatest number of employees, so the theory goes. They do the same with public school teachers -- move them from city to city, school to school. It's very much like American clergy. Or Gap store management (where people rotate between positions in one store: store manager, visuals manager, stock manager.) On top of moving around all the time, Japanese executives aren't paid anything like their American counterparts. And they work horrible hours. It will be interesting to see if that changes: when my partner was going to school in Japan in the 1980s: they went to school not only year round, but six days a week. Now they just go five. So there is a new expectation about how much work you must do to reach your goals.

Posted by: DC1974 on June 16, 2006 at 11:02 AM | PERMALINK

Stefan -- you assume that the rich getting richer makes the poor get poorer. Actually, the poor are also getting richer, although there are many new poor, especially immigrants.

Bill Gates doesn't need tens of billions of dollars, but that money didn't come out of the pockets of immigrant farm workers.

Posted by: ex-liberal on June 16, 2006 at 11:05 AM | PERMALINK

Stefan: The truly talented are attracted by the work, by the chance to do good work and perform at their peak. The merely greedy, stupid and/or lazy are attracted by the money.

With an eye to your follow-up post of 10:51, which makes another good point, I'd add, with the sincere hope not to offend, that this is something that plays itself out frequently in professions like law and medicine as well as in the more obvious corporate venues. This is wholly anecdotal, but my work keeps me in touch with a lot of lawyers and law students. Most of them went into the field because of a sincere interest in and love for the law; many are attracted to public service as well. But a startling number of them, particularly the younger ones (although I see that changing to a degree with the current crop of students) seem to have chosen law largely or even primarily because of its income potential. (As an aside, that's an expensive choice--if you get out of law school owing 80 or 100 large, as many today do, your potential for changing careers is a bit limited.)

Am not suggesting that attorneys are more likely than many others to think it's mostly about the bling. But it's worth mentioning that this is a viewpoint that goes beyond CEO aspirants.

Posted by: shortstop on June 16, 2006 at 11:08 AM | PERMALINK

Stefan -- you assume that the rich getting richer makes the poor get poorer.

Sometimes, yes -- when, for example, the rich get richer by shutting down the factory in the US and moving the jobs to India for one-tenth the labor costs.

Actually, the poor are also getting richer, although there are many new poor, especially immigrants.

But the rates of increase for the two groups aren't tracking each other. The rich are growing richer at a far, far faster rate than the poor, to the point where an executive or investment banker who would have made, say, $10 million fifteen years ago makes $100 million now. The amount of wealth is vastly disproportional.

Posted by: Stefan on June 16, 2006 at 11:18 AM | PERMALINK

American Hawk:

The market isn't working, because it isn't "free". It is rigged. People like Bush don't really believe in free markets - they believe in rigged markets. If they were truly "free" you would be seeing a host of small oil and alternative energy companies springing up to take advantage of the fact that we are running out of oil and these companies wouldn't give their CEOs $600 million retirement packages. You don't however, because these ostensible "free marketeers" have erected massive barriers to entry.

You are living in a dream world. Wake UP!

SK

Posted by: Stephen Kriz on June 16, 2006 at 11:22 AM | PERMALINK

Hey American Hawk... go look up the word "collusion" in the dictionary, and think about how it might apply to executive compensation. Then think about the relationship to collusion and the "market."

Perhaps thats asking too much.

Posted by: Zac on June 16, 2006 at 11:23 AM | PERMALINK

Am not suggesting that attorneys are more likely than many others to think it's mostly about the bling. But it's worth mentioning that this is a viewpoint that goes beyond CEO aspirants.

No, you're absolutely right. I'd say that about one in ten of the people I knew in law school my first year who said that they wanted to go into government or public service actually wound up in those fields after law school -- most everyone went to large firms and their large salaries. Partly the desire for a nice lifestyle, but probably even more the crushing debt burden.

The sad result, though, is that a lot of young, talented, committed people who could be doing work to benefit society wind up, essentially, making the rich richer.

Posted by: Stefan on June 16, 2006 at 11:23 AM | PERMALINK

Stefan, I agree with you that the rich are growing richer at a far, far faster rate than the poor. The gap between the well-off and poor has been widening since the 1990's. Richer than the CEOs are big investors, top lawyers, and various sports and entertainment stars.

Also, the gap between upper middle class and lower clase is also widening. An educated person makes a good living; there are fewer and fewer decent jobs for the uneducated.

So, what shall we do about it? Should we strip Michael Jordan and Katie Couric of their wealth? I don't thing so. If we do so, we've destroyed freedom.

Posted by: ex-liberal on June 16, 2006 at 11:26 AM | PERMALINK

The only way American Industry has made money in 30 years is by cutting American jobs and replacing them with lower-paid foreign workers. Why we as ordinary, working-class taxpaying citizens subsidize this policy is anybody's guess.

Of course, then you read the moronic invocations of the "free market" by the likes of American Hawk, and you start to understand.

Posted by: brewmn on June 16, 2006 at 11:33 AM | PERMALINK

So, what shall we do about it? Should we strip Michael Jordan and Katie Couric of their wealth? I don't thing so. If we do so, we've destroyed freedom.

No, let's destroy freedom! It's the only thing to do! Death to freedom!

Look, I enjoy the Awful Alternative Argument as much as the next guy, but let's all agree that there's a reasonable middle road between unbridled rapaciousness and communism -- which is the path the US was on from the 1950s to the 1970s, with a strong middle and working class.

Posted by: Stefan on June 16, 2006 at 11:59 AM | PERMALINK

But a startling number of them, particularly the younger ones ... seem to have chosen law largely or even primarily because of its income potential.

Interestingly, I was just saying this to a lawyer friend last night. I said I don't trust people who only do things because they pay well, and he said, fair point, but then you shouldn't trust doctors either, because (in his view) that's why most of them go to Med School.

Which I thought was also an interesting point.

Posted by: craigie on June 16, 2006 at 12:02 PM | PERMALINK

Bill Gates doesn't need tens of billions of dollars, but that money didn't come out of the pockets of immigrant farm workers.

It's sort of like the tragedy of the commons, but in reverse: each individual's decision to hand over $50 or so dollars to Microsoft made perfect economic sense for that individual, in that he traded money for a good or service he valued at that amount, but the sum total of all those rational individual decisions is an irrational result where one man has tens of billions of dollars, giving him far more wealth and influence than is healthy for someone in a supposedly egalitarian democracy to have.

Posted by: Stefan on June 16, 2006 at 12:04 PM | PERMALINK

Totally OT, but tbrosz is alive and well and just as dishonest as ever, over at John Cole's place

You mean he didn't enlist and go to Iraq? How disappointing.

Posted by: ckelly on June 16, 2006 at 12:07 PM | PERMALINK

In 2004, the average CEO got a 30% pay increase.

http://money.cnn.com/magazines/fortune/fortune_archive/2005/12/12/8363111/

Did the value of their companies increase by 30% in 2004 ? I don't recall the stock market increasing by %30 in 2004.

Food for thought....

Posted by: Stephen on June 16, 2006 at 12:11 PM | PERMALINK

craigie: Interestingly, I was just saying this to a lawyer friend last night. I said I don't trust people who only do things because they pay well, and he said, fair point, but then you shouldn't trust doctors either, because (in his view) that's why most of them go to Med School.

Which I thought was also an interesting point.

That's why I mentioned medicine as well, although I spend much less time with physicians than with attorneys, so I don't have as strong a feeling about the former. It does seem that the medical profession enjoys more respect in the public eye than the legal one does, so there's a huge prestige factor in there for doctors that is, for attorneys, mixed at best. (When was the last time you heard a doctor joke? Wait, actually I have a couple about God playing doctor, but I had to think about it.)

Stefan: I'd say that about one in ten of the people I knew in law school my first year who said that they wanted to go into government or public service actually wound up in those fields after law school -- most everyone went to large firms and their large salaries. Partly the desire for a nice lifestyle, but probably even more the crushing debt burden.

But one feeds the other, does it not? A new lawyer with a mountain of tuition debt could ostensibly work at a high-paying firm in order to pay off his student loans and build some wealth, then go on to public-interest law if that's a strongly held goal for him. I've known some lawyers who intended to do that, but the ones who were able to actually do it are few and far between. Most of them were so established, such figureheads and so financially comfortable that it became sort of a highly publicized second career. It's hard to let go of a more affluent lifestyle, but it's much harder for people to let go of their perceived status and social position. It's really a catch 22 for the law schools, most of which are legimitately concerned about the undersupply of people going into public-interest law.

Posted by: shortstop on June 16, 2006 at 12:22 PM | PERMALINK

It does seem that the medical profession enjoys more respect in the public eye than the legal one does,

Well, yes. One of them is trying to make things better, and the other only gets paid if things get worse.

Posted by: craigie on June 16, 2006 at 12:29 PM | PERMALINK

Or maybe it's that most politicians are also lawyers. When we get more doctors in politics, they'll look bad too (Frist!).

Posted by: craigie on June 16, 2006 at 12:31 PM | PERMALINK

"When we get more doctors in politics, they'll look bad too (Frist!)."

And MD child psychologist, Congressman Jim McDermott

Posted by: ex-liberal on June 16, 2006 at 12:36 PM | PERMALINK

Food for thought.

Yeah, a Twinkie.

Posted by: Brautigan on June 16, 2006 at 12:40 PM | PERMALINK

It's sort of like the tragedy of the commons, but in reverse: each individual's decision to hand over $50 or so dollars to Microsoft made perfect economic sense for that individual, in that he traded money for a good or service he valued at that amount, but the sum total of all those rational individual decisions is an irrational result where one man has tens of billions of dollars, giving him far more wealth and influence than is healthy for someone in a supposedly egalitarian democracy to have.

What superior alternative method of organizing our economy do you propose, then? Socialism?

I just saw in the paper today that Bill Gates is going to step down from his day-to-day duties at Microsoft to concentrate on his philanthropy. The Gates Foundation is doing really great work in the developing world.

Posted by: GOP on June 16, 2006 at 12:43 PM | PERMALINK

Look, I enjoy the Awful Alternative Argument as much as the next guy, but let's all agree that there's a reasonable middle road between unbridled rapaciousness and communism -- which is the path the US was on from the 1950s to the 1970s, with a strong middle and working class.

If the "middle road" is supposed to be some flavor of socialism or social democracy, the industrialized democracies have been moving away from those policies for decades. They don't work. European countries have been slashing their income tax rates and cutting back their welfare programs to spur economic growth and job creation and control their budgets.

Posted by: GOP on June 16, 2006 at 12:50 PM | PERMALINK
It's sort of like the tragedy of the commons, but in reverse: each individual's decision to hand over $50 or so dollars to Microsoft made perfect economic sense for that individual, in that he traded money for a good or service he valued at that amount, but the sum total of all those rational individual decisions is an irrational result where one man has tens of billions of dollars, giving him far more wealth and influence than is healthy for someone in a supposedly egalitarian democracy to have.

Well, the solution is this; since Gates is among the people disproportionately benefiting from the structure of our ordered society, he should be part of the class disproportionately paying for it. Which is the principal behind progressive taxation of income, the estate tax, etc.

Unfortunately, people wanting to avoid that justice and instead promote the interests of capital broke that system with preferential taxation of capital, and are looking to compound that problem by eliminating estate taxation.

So, the solution is to preserve the estate tax, plug the means of insulating vast estates from it, and eliminate preferential taxation of capital income vs. labor income.

Posted by: cmdicely on June 16, 2006 at 1:00 PM | PERMALINK

The economist did have a good big front page article on the american prison problem a year or so ago, but in general I agree that over the five or so years I have read it on and off it's right wing spin has picked up noticably. I have read that it has been courting the american market over that time (and growing american sales dramatically) so this may well be an intentional FOX-ification to gain republican readers.

Posted by: jefff on June 16, 2006 at 1:13 PM | PERMALINK

Quick give bill gates another tax cut so he keeps working!

Thats how its supposed to work right? Give the rich tax cuts and they work harder? They don't like... retire do they?

Posted by: jefff on June 16, 2006 at 1:16 PM | PERMALINK

What superior alternative method of organizing our economy do you propose, then? Socialism?

No, destroying freedom by stripping Michael Jordan and Katie Couric of their wealth, as ex-liberal proposed above.

Posted by: Stefan on June 16, 2006 at 1:17 PM | PERMALINK

cmdicely,

Well, the solution is this; since Gates is among the people disproportionately benefiting from the structure of our ordered society, he should be part of the class disproportionately paying for it.

He is.

Unfortunately, people wanting to avoid that justice and instead promote the interests of capital broke that system with preferential taxation of capital, and are looking to compound that problem by eliminating estate taxation.So, the solution is to preserve the estate tax, plug the means of insulating vast estates from it, and eliminate preferential taxation of capital income vs. labor income.

What economic or moral principle dictates that capital gains should be taxed at the same rate as "labor income," or any kind of income, for that matter, or any other kind of increase in wealth?

Posted by: GOP on June 16, 2006 at 1:25 PM | PERMALINK
What economic or moral principle dictates that capital gains should be taxed at the same rate as "labor income," or any kind of income, for that matter, or any other kind of increase in wealth?

The moral principle that things should be treated differently only when there is a difference that morally justifies that distinction.

Posted by: cmdicely on June 16, 2006 at 1:28 PM | PERMALINK

cmdicely,

The moral principle that things should be treated differently only when there is a difference that morally justifies that distinction.

Then what is the relevant difference that morally justifies different tax rates on different levels of income?

Posted by: GOP on June 16, 2006 at 1:37 PM | PERMALINK
Then what is the relevant difference that morally justifies different tax rates on different levels of income?

I've already explained that in this thread; I'm not going to repeat myself just because you can't be bothered to read the posts you respond to.

Posted by: cmdicely on June 16, 2006 at 1:41 PM | PERMALINK

cmdicely,

I've already explained that in this thread; I'm not going to repeat myself just because you can't be bothered to read the posts you respond to.

Well, say it again. I don't have a job, a partner, or any friends. I just got up and I need to fill the next fourteen or fifteen hours with obsessive displays of my mental inbalance. Please help me do it.

Posted by: GOP on June 16, 2006 at 1:47 PM | PERMALINK

cmdicely,

I've already explained that in this thread;

No you haven't. You said something to the effect that "the rich benefit more, therefore the rich should pay more," but that principle is satisfied by taxing all income at the same rate.

Posted by: GOP on June 16, 2006 at 1:48 PM | PERMALINK

Investment of capital is the fundamental engine of economic growth. That is why capital gains should be taxed at a lower rate than income.

Posted by: Stefan on June 16, 2006 at 1:58 PM | PERMALINK

That is why capital gains should be taxed at a lower rate than income.

Capital gains are just one type of income derived from investing capital.

Any true "free-market" economist would tell you that the government shouldn't be in the business of incentizing certain types of income over others.

Posted by: Stephen on June 16, 2006 at 2:05 PM | PERMALINK

Ah, I see I have a name hijacker by whoever posted as me at 1:58 PM.

Posted by: Stefan on June 16, 2006 at 2:08 PM | PERMALINK

Stefan,

Investment of capital is the fundamental engine of economic growth. That is why capital gains should be taxed at a lower rate than income.

I agree.

Posted by: GOP on June 16, 2006 at 2:09 PM | PERMALINK

Stephen,

Any true "free-market" economist would tell you that the government shouldn't be in the business of incentizing certain types of income over others.

Then I guess there aren't many "true 'free market' economists," as you define that term.

Posted by: GOP on June 16, 2006 at 2:15 PM | PERMALINK

So, the solution is to preserve the estate tax, plug the means of insulating vast estates from it, and eliminate preferential taxation of capital income vs. labor income.

And much to his credit, Gates is strongly opposed to the capital gains tax. Also to his credit (mostly) is his intent to NOT pass on the bulk of his wealth to his children, instead requiring that they work (such as that goes for his family) for it. He is intending to cast the vast majority of his 50 billion into the Gates Foundation.

As good as that is, there is the catch that a lot of it is masturbatory: he spends a lot of money making sure schools and children/families get computers...that use Windoze! Strings, strings, strings.

It would be better spent on NOT enhancing Microsoft market share and enhancing anti-malarial research and antivirals for AIDS and the like. But that's just me without a personal stake in enriching my company and furthering the purpose of monopoly.

Posted by: Praedor Atrebates on June 16, 2006 at 2:18 PM | PERMALINK

And much to his credit, Gates is strongly opposed to the capital gains tax.

I meant to add another word to that: And much to his credit, Gates is strongly opposed to the capital gains tax cuts. In fact, he is largely opposed to GOP tax policy in general. So are a number of decent superwealthy wealthy bastards: Sorros, Buffet, Turner, so on, so forth. People that actually do something human and humane with their wealth rather than party hardy (ala GOPers).

Posted by: Praedor Atrebates on June 16, 2006 at 2:23 PM | PERMALINK

Man, my name hijacker doesn't even have the common politeness to use a different email address.

Posted by: Stefan on June 16, 2006 at 2:25 PM | PERMALINK
You said something to the effect that "the rich benefit more, therefore the rich should pay more,"

No, I didn't. If you aren't satisfied with my original wording, a rephrasing which preserved the meaning would be "the ability of the rich to derive the level of income they do is more a result of the structures of ordinary society, and therefore they should pay a greater portion of their income to support organized society." But, even if what you said was a fair statement...

but that principle is satisfied by taxing all income at the same rate.

Even if we were to take your your incorrect overt premise, for the sake of argument, as a given, that's not really a justified conclusion unless you assume "income" as inherent value, rather than value based on utility, given that declining marginal utility applies to money just like anything else.

Posted by: cmdicely on June 16, 2006 at 2:26 PM | PERMALINK

It would be better spent on NOT enhancing Microsoft market share and enhancing anti-malarial research and antivirals for AIDS and the like.

The Gates Foundation has already provided grants for global health programs of nearly $6 billion, and plans to spend much more in the future. And its grants are carefully designed to do the most good for the most people. They're not distorted by political agendas or disease-of-the-week public sympathies, as so much aid to the developing world is. If you can find a charitable foundation that is doing better work in this area than Gates, I'd like to hear about it.

Posted by: GOP on June 16, 2006 at 2:31 PM | PERMALINK

The nameshifting (and perhaps now namestealing?) GOP wrote, or perhaps merely endorsed:

Investment of capital is the fundamental engine of economic growth. That is why capital gains should be taxed at a lower rate than income.

No, the engine of economic growth is the application of labor to capital. If either has priority, it is the provision of labor, which can precede and create some forms capital ex nihilo, and others from the raw product of nature without man-made (either manufactured or created through exclusive property rights to the product of nature) "capital".

Posted by: cmdicely on June 16, 2006 at 2:34 PM | PERMALINK

Even though I think many CEOs are overpaid, it really is none of the government's business unless it is obtained illegally. If the shareholders don't like it, and their opinion is one that matters, they are free to do something about it.

Posted by: Yancey Ward on June 16, 2006 at 2:35 PM | PERMALINK
BTW, did we all know that the Constitution does not specify an oath of office for the Vice-President?

The Vice President is an executive officer of the united States, and Article VI states: The Senators and Representatives before mentioned, and the members of the several state legislatures, and all executive and judicial officers, both of the United States and of the several states, shall be bound by oath or affirmation, to support this Constitution...

Posted by: cmdicely on June 16, 2006 at 2:39 PM | PERMALINK

The Gates Foundation has already provided grants for global health programs of nearly $6 billion, and plans to spend much more in the future. And its grants are carefully designed to do the most good for the most people.

Oh, I don't totally disparage the Gates Foundation and what it does...only the little part the works very hard to increase Microsoft marketshare in the guise of philanthropy. That's all. Except for that portion, it is a supremely good and worthy Foundation.

Increasing the marketshare of Word or Windoze XP, etc, is NOT charitable. It is parasitic. the rest is great.

Posted by: Praedor Atrebates on June 16, 2006 at 2:39 PM | PERMALINK

Labor income is always superior to income derived from shuffling paper through speculative bodies (like the stock market).

Posted by: GOP on June 16, 2006 at 2:44 PM | PERMALINK

And its grants are carefully designed to do the most good for the most people.

Not to get too far off topic, and not to disparage what Gates is doing, because I don't, but there is some debate about that statement. Gates is (surprise!) interested in high-tech solutions to problems. So he funds stuff like genetic engineering of mosquitoes to prevent them from reproducing.

Meanwhile, much cheaper and more immediate gains can be had from giving away mosquito nets to poor villages, but he's not interested in that. And so lots of people are dying now who could be saved now.

Like I said, I'm glad he's spending money on this, but nobody's perfect.

Posted by: craigie on June 16, 2006 at 2:54 PM | PERMALINK

cmdicely,

No, I didn't.

Yes, you did.

Even if we were to take your your incorrect overt premise, for the sake of argument, as a given, that's not really a justified conclusion

Yes it is. Under a single rate, the higher the income the higher the tax, satisfying your moral principle that the rich should pay more.

If your belief about how much more the rich should pay is not satisfied by equal tax rates on all incomes, then you've already abandoned the principle that justice requires equal tax rates, in which case your claim that justice requires that income and capital gains tax rates be the same is not valid. "Equal tax rates" is just as arbitrary a standard of fairness or economic justice as "equal tax amounts."

Posted by: GOP on June 16, 2006 at 2:55 PM | PERMALINK

Then I guess there aren't many "true 'free market' economists," as you define that term.

Do you believe that government should use the tax code to incentize certain types of investments over other types of investments ?

Posted by: Stephen on June 16, 2006 at 2:55 PM | PERMALINK

Cragie said: I said I don't trust people who only do things because they pay well, and he said, fair point, but then you shouldn't trust doctors either, because (in his view) that's why most of them go to Med School.

Actually, I'm not sure doctors as a whole do so great financially. I've been surprised recently at how many doctors I've known over the years have given up their practices, usually citing financial reasons. In general practice and all but a few boutique specialties, I think the ratio of pay to hours worked, not to mention stress and pressure, is not as favorable as we non-medical types might think.

In other words, I doubt many people become doctors primarily for the money.

Posted by: Virginia Dutch on June 16, 2006 at 2:56 PM | PERMALINK

If capital gains taxes were raised to the same level as income taxes, it would have a strongly negative effect on our economy, suppressing investment and the incentive to take risks. The result would be lower economic growth and higher unemployment.

Posted by: Stefan on June 16, 2006 at 2:59 PM | PERMALINK

"name hijacker doesn't even have the common politeness to use a different email address."

The "common politeness" of a name-stealer. Interesting concept.

Posted by: Jason on June 16, 2006 at 3:02 PM | PERMALINK

In other words, I doubt many people become doctors primarily for the money.

Not to necessarily disagree, but if you're right, then why did they give up their practices, citing financial reasons?

Posted by: craigie on June 16, 2006 at 3:02 PM | PERMALINK

In other words, I doubt many people become doctors primarily for the money.

I think it depends on their specialty...and location. Plastic surgery in San Diego or LA? Money. Heart surgeon? Maybe (likely) money. General practice? Good person, seeks to do the most good for the largest number, regardless of location.

Lawyers: Corporate law? In it for the money only. Mafioso lawyer? In it for the money and perks. Prosecutor? Not in if for the money. Defense Attorney? Maybe/maybe not in it for the money (depends on client choice). Environmental lawyer? On the side of angels, damn the money. Civil Rights attorney? On the side of angels, damn the money.

Posted by: GOP on June 16, 2006 at 3:10 PM | PERMALINK

GOP: I think it depends

What's that? Nuance from the Right? Say it ain't so!

Posted by: craigie on June 16, 2006 at 3:14 PM | PERMALINK
Yes, you did.

Look, you just asserting that what I said meant something completely different that you invented is ludicrous.

Yes it is. Under a single rate, the higher the income the higher the tax, satisfying your moral principle that the rich should pay more.

You know, there's not much point in dicussing things with you if you are just going to clip the parts that explain why your argument is wrong and repeat the same claims. So, rather than responding again, I'll just point you back to reread what you clipped from the post you responded to.


Posted by: cmdicely on June 16, 2006 at 3:18 PM | PERMALINK

And my name stealer's back at 2:59 PM....

Posted by: Stefan on June 16, 2006 at 3:26 PM | PERMALINK

cmdicely,

Look, you just asserting that what I said meant something completely different that you invented is ludicrous.

If I had done that, it might be, yes.

You know, there's not much point in dicussing things with you if you are just going to clip the parts that explain why your argument is wrong and repeat the same claims. So, rather than responding again, I'll just point you back to reread what you clipped from the post you responded to.

Er, okay. Done. As I said, if your belief about how much more the rich should pay is not satisfied by equal tax rates on all incomes, then you've already abandoned the principle that justice requires equal tax rates, in which case your claim that justice requires that income and capital gains tax rates be the same is not valid. "Equal tax rates" is just as arbitrary a standard of fairness or economic justice as "equal tax amounts." Neither "equal tax amounts" nor "equal tax rates" would be just unless they produced the particular distribution of the tax burden across taxpayers that you believe is fair.

Posted by: GOP on June 16, 2006 at 3:30 PM | PERMALINK

Do you believe that government should use the tax code to incentize certain types of investments over other types of investments ?

Yes.

Posted by: Stefan on June 16, 2006 at 3:32 PM | PERMALINK

cmdicely,

No, the engine of economic growth is the application of labor to capital.

Labor is obviously a crucial component of economic activity, but you can't apply labor to capital that hasn't been invested because of excessive taxes on capital gains. If you think you can make the case that raising capital gains taxes to the rates applied to ordinary income would increase economic growth, go ahead.

Posted by: GOP on June 16, 2006 at 3:43 PM | PERMALINK

And again at 3:32....

Posted by: Stefan on June 16, 2006 at 3:44 PM | PERMALINK
As I said, if your belief about how much more the rich should pay is not satisfied by equal tax rates on all incomes, then you've already abandoned the principle that justice requires equal tax rates, in which case your claim that justice requires that income and capital gains tax rates be the same is not valid.

Again, there's not much point in discussing things with you if you are just going to sit around inventing claims to rebut. I never claimed "justice requires equal tax rates", nor, a fortiori, does anything I've said about taxes on income from labor and income from capital gains rest on the premise that "justice requires equal tax rates".

Posted by: cmdicely on June 16, 2006 at 3:47 PM | PERMALINK

cmdicely,

I never claimed "justice requires equal tax rates",

Really? So I just imagined your statement...

"Unfortunately, people wanting to avoid that justice and instead promote the interests of capital broke that system with preferential taxation of capital"

...did I?

Posted by: GOP on June 16, 2006 at 3:52 PM | PERMALINK
Labor is obviously a crucial component of economic activity, but you can't apply labor to capital that hasn't been invested because of excessive taxes on capital gains.

Nor can you apply labor that is not done because of excessive relative taxes on labor income to capital. The former is no more a valid argument for preferential taxes on capital than the latter is for equally preferential taxes on labor.

If you think you can make the case that raising capital gains taxes to the rates applied to ordinary income would increase economic growth, go ahead.

why would I want to make such an argument? While aggregate economic growth might be something government should pursue under certain distributive assumptions, mere aggregate growth, on its own, is not something which has an independent public value, and it is therefore not a legitimate aim of government.

Posted by: cmdicely on June 16, 2006 at 3:53 PM | PERMALINK
I never claimed "justice requires equal tax rates", Really?

Really.

So I just imagined your statement...

"Unfortunately, people wanting to avoid that justice and instead promote the interests of capital broke that system with preferential taxation of capital"

...did I?

No, you just (apparently) imagined that that statement is, or contains, or depends on, the rather different, general claim that "justice requires equal tax rates".

Posted by: cmdicely on June 16, 2006 at 3:56 PM | PERMALINK

cmdicely,

Nor can you apply labor that is not done because of excessive relative taxes on labor income to capital.

Given the low unemployment rate and the large number of people from other countries seeking employment in the United States, it does not appear that income taxes are a significant deterrent to the provision of labor in our economy.

why would I want to make such an argument?

Because you claimed that capital is "preferentially" taxed.

While aggregate economic growth might be something government should pursue under certain distributive assumptions, mere aggregate growth, on its own, is not something which has an independent public value,

Tee hee hee. Really? You don't think economic growth itself is desirable? Good luck with that argument.

Posted by: GOP on June 16, 2006 at 4:07 PM | PERMALINK

cmdicely,

No, you just (apparently) imagined that that statement is, or contains, or depends on, the rather different, general claim that "justice requires equal tax rates".

Nice try. So what was "preferential taxation of capital" supposed to mean, if not lower tax rates on capital?

Posted by: GOP on June 16, 2006 at 4:12 PM | PERMALINK
You don't think economic growth itself is desirable?

No, that's wrong. It is clearly desirable to someone. What I don't think is that it is a public good, independent of distribution.

Posted by: cmdicely on June 16, 2006 at 4:18 PM | PERMALINK
So what was "preferential taxation of capital" supposed to mean

What is not supposed to mean is the claim, far more general than any I've made on the issue and not required for any claim I've made on the issue, that you have confused it with, specifically, that "justice requires equal tax rates".

In fact, when you asked for the moral principle involved, I gave you one which is quite different than that. I don't know whether you are merely incapable of reading or deliberately being obtuse.

Posted by: cmdicely on June 16, 2006 at 4:26 PM | PERMALINK

cmdicely,

No, that's wrong. It is clearly desirable to someone. What I don't think is that it is a public good, independent of distribution.

Billiant. Please put that hilariously obtuse line in your stump speech: "Economic growth is not a public good, independent of distribution!" Meanwhile, your opponent will be saying what virtually all economists would say and what most people already believe: Economic growth is a good thing. You might get the lefty-geek-pedant vote. Your opponent will get everyone else.

Posted by: GOP on June 16, 2006 at 5:30 PM | PERMALINK
Please put that hilariously obtuse line in your stump speech

I wasn't aware I was running for political office, or discussing how to sell a policy proposal; I though we were discussing the justifications of policy ideas.

Posted by: cmdicely on June 16, 2006 at 5:33 PM | PERMALINK

cmdicely,

What is not supposed to mean ...

I didn't ask you what it is not supposed to mean. I asked you what it is supposed to mean, if not lower taxes on capital. Do you have an answer? Do you even know what you meant?

Posted by: GOP on June 16, 2006 at 5:34 PM | PERMALINK

cmdicely,

I wasn't aware I was running for political office

It was an illustration of the stupidity of your pedantic quibble with the universally-recognized common-sense piece of wisdom that economic growth is a good thing.

But since you mention it, I remember you did once suggest that you might one day run for public office. Trust me, you have neither the skills nor the temperament for it.

Posted by: GOP on June 16, 2006 at 5:42 PM | PERMALINK

cmdicely,

If either has priority, it is the provision of labor, which can precede and create some forms capital ex nihilo, and others from the raw product of nature without man-made (either manufactured or created through exclusive property rights to the product of nature) "capital".

This is a joke, right? In order to purchase someone's labor, I need capital to pay his wages and to acquire a factory or an office and whatever other resources are needed to use that labor in productive economic activity. As I said, capital is the engine of economic growth in our economy (hint: that's why the system is called "capitalism"). Labor is obviously also required, but capital "precedes" it.

Posted by: GOP on June 16, 2006 at 5:52 PM | PERMALINK

As I said, capital is the engine of economic growth

Yes, but why did you say it under Stefan's handle?

Posted by: curious on June 16, 2006 at 6:12 PM | PERMALINK
This is a joke, right?

Like pretty much everything else you say, wrong.

In order to purchase someone's labor, I need capital to pay his wages and to acquire a factory or an office and whatever other resources are needed to use that labor in productive economic activity.

Labor can be productive applied without being "purchased" before it has produced anything, and can be purchased without pre-existing capital, as in when it is purchased with the promised exchange of future labor.

As I said, capital is the engine of economic growth in our economy

You've claimed that, and as I've explained, you are wrong to do so.


(hint: that's why the system is called "capitalism")

The system called "capitalism" largely is called that because of the fact that it produces what used to be a more prominent definition of capitalism, "The concentration or massing of capital in the hands of a few; also, the power or influence of large or combined capital", not because of (the belief) that capital is its engine.


Posted by: cmdicely on June 16, 2006 at 6:41 PM | PERMALINK

They should learn from the Japanese. Average salary of 26 top Toyota executives is $320K. Abused Capitalism is just as bad as abused Communism.

http://www.azcentral.com/arizonarepublic/business/articles/0609toyotapay0609.html

Posted by: anonymous on June 16, 2006 at 6:43 PM | PERMALINK
It was an illustration of the stupidity of your pedantic quibble with the universally-recognized common-sense piece of wisdom that economic growth is a good thing.

I made no quibble with any such "common sense" wisdom; I merely observe that, like much "common sense", its true only with unstated other assumptions. If one assumes the same distribution before and after, economic growth is clearly good for all. But, as a simple illustration, in a system with the 3 people, all doing equally well, growth that makes one do four times as well and leaves the others with nothing is, certainly, a private good for the one who benefits, but not "good" from any other perspective, despite the fact there has been aggregate improvement. Distribution matters; aggregate economic growth is not a public good independent of distribution.

There's nothing "stupid" about that, just because it doesn't make a great soundbite.

But since you mention it, I remember you did once suggest that you might one day run for public office.

Its certainly, at least abstractly, possible.

Trust me, you have neither the skills nor the temperament for it.

I'm not sure what makes you think I'd trust you on this or any other matter, given your demonstrated serial dishonesty, plus your real or feigned stupidity.

Posted by: cmdicely on June 16, 2006 at 6:48 PM | PERMALINK
I didn't ask you what it is not supposed to mean.

That's okay, I wasn't answering the question, but instead pointing out that the question was irrelevant, misplaced, and only made any sense at all if you totally ignored the actual criticism of your mischaracterization of my position as the general statement "justice requires equal tax rates".

Posted by: cmdicely on June 16, 2006 at 6:53 PM | PERMALINK

"It was an illustration of the stupidity of your pedantic quibble with the universally-recognized common-sense piece of wisdom that economic growth is a good thing...."

Posted by: GOP on June 16, 2006 at 5:42 PM | PERMALINK

Assumption 1: economic growtrh is necessarily a good thing.

Assumption 2: that this is universally accepted.

Assumtion 3: when you combine 1 and 2 it makes for "common-sense".

As ever, ignorant.

Posted by: notthere on June 16, 2006 at 7:15 PM | PERMALINK

A reminder to righties or naive anyones about whether high executive pay is a true market action: It isn't. The boards that pick executive pay are using the company's money and don't have to use their own money to make choices with. Indeed, they are typically rewarded for picking a high salary. It isn't a market.

Posted by: Neil' on June 16, 2006 at 8:26 PM | PERMALINK

cmdicely,

Labor can be productive applied without being "purchased" before it has produced anything, and can be purchased without pre-existing capital, as in when it is purchased with the promised exchange of future labor.

Tee hee hee. I don't know what planet you're living on, but in the U.S. economy on this planet, just as in all capitalist economies, employees do not tend to work for free or for the "promise" of future wages or labor. They are, and expect to be, paid on a weekly or monthly basis. So the possibilities you cite are completely irrelevant to how our economy, and capitalist economies in general, actually work. Your idea that labor "precedes" capital is just utter nonsense, not only because capital is needed to meet a company's payroll, but because capital is needed to acquire all the other resources to which the labor is applied to create wealth.

Posted by: GOP on June 16, 2006 at 8:55 PM | PERMALINK

cmdicely,

I wasn't answering the question, but instead pointing out that the question was irrelevant, misplaced,

There's nothing irrelevant or misplaced about it. What was "preferential taxation of capital" supposed to mean, if not lower tax rates on capital? In what different way did you mean "preferential" taxation of capital?

Posted by: GOP on June 16, 2006 at 9:00 PM | PERMALINK

Instead of paying the CEO another million, how about giving each of 10,000 employees another $100?

Posted by: doug r on June 16, 2006 at 9:56 PM | PERMALINK

It won't be long and they will have leaders who are barely functional retards who wear cowboy boots and are afraid of horses.

Posted by: Stephen Kriz on June 16, 2006 at 11:27 PM | PERMALINK

It won't be long and they will have political leaders who are barely functional retards who wear cowboy boots and are afraid of horses.

Posted by: Stephen Kriz on June 16, 2006 at 11:28 PM | PERMALINK

But at least the Europeans subject these pay packages to very high income taxes, unlike us.

Posted by: bob h on June 17, 2006 at 6:15 AM | PERMALINK




 

 

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