If someone offers you half of pie #1 or all of pie #2, the first thing you should ask is, “How big are the pies?”
I don’t know when it started, but many Americans have forgotten to ask this question when they look at income inequality and the redistribution of wealth.
The conventional wisdom is perhaps correct that wealth is now more concentrated, but that is relatively unimportant because the amount of wealth is not fixed. It is entirely possible for wealth to become more concentrated and for EVERYONE to be better off.
Real GDP per capita in 2010 was about 40 times the same figure in 1790. Since 1945 that measure of individual wealth has nearly tripled.
Wealth has recently fallen to just below 2005 levels, but it remains 30 percent higher than it was in 1990 and six percent higher than the end of the dot com boom in 2000.
Stick with me. We will get to health soon.
One of the major divides in American politics today – if not the biggest – is whether government should care more about the size of the pie as a whole or the size of the piece each individual gets. We can’t have our pie and eat it too because these goals are counterproductive, at least in part.
It would be one thing if government operated as a perfect Robin Hood, stealing from the rich and giving to the poor. I can assure you government is neither perfect nor Robin Hood.
In the process of transferring money from the rich to the poor, government takes a cut. Politicians, special interests, bureaucrats and other government employees all get something. If there is any left it goes to the poor.
But wait. It goes to the poor in the form chosen by the politicians, special interests and bureaucrats. That’s why $10 of help to the poor often does not feel like $10 to the person receiving it.
It feels like much less.
So money is taken from the rich, put through a black box in Hartford or Washington and some money comes out to help the poor, but not in the most helpful way.
Case and point: Gov. Daniel Malloy just signed a law giving $291 million in subsidies for the Jackson Laboratory, a Maine nonprofit, to open a genetics laboratory in Farmington. This money will subsidize the laboratory’s hiring to the tune of $42,000 per job per year over the next 20 years.
If you can’t think of a better way to spend $300 million to improve the state’s health or economy, your imagination could use a tune-up.
And this brings me to my larger point: health and the economy are intertwined. More wealth, more health.
When the government spends money – either borrowed money like Jackson (interest costs: more than $100 million) or taxes – it has to come from somewhere.
Borrowed money is really just spending future taxes today, so that leaves us with taxes, today or tomorrow.
A tax dollar spent by the government would have had another use if it was not spent by the government. When people talk about stimulating the economy, economic development or increasing health care spending, they often forget that.
In order for government spending to be worth it, it has to exceed the value of what that dollar would otherwise be spent on.
Of course that is impossible to know in each case. Certainly, some government uses of money exceed the value of some non-government uses.
But let’s remember the black box of government isn’t a perfect Robin Hood. Instead, government is tragically human.
People respond to incentives. The private sector is full of incentives (prices), while the government often obscures true costs with false prices.
Wealthy Americans have the resources to give their CPA the go-ahead when he says, “Pay me 90 cents and I’ll save you a dollar in taxes.”
This kind of labor by CPAs is not productive (although it may be more productive than the alternative, giving the money to the government).
Manipulating taxes, a problem that increases as tax rates rise, does not add to the overall wealth of Americans as much as other uses of the same resource.
Playing games with taxes is just one very small example of government creating incentives for spending money in unproductive ways.
It is possible to spend $1 and get less than a dollar for it. The government does this on a regular basis.
My fellow contributor C. Brandon Ogbunu writes that wealthy Americans “could pay a fairer share (by percentage) of their income and suffer (literally) no lifestyle consequences.”
True, taking money from the rich doesn’t hurt them much.
But how much does it hurt the rest of society?
In order for taxing “the rich” to be worthwhile, the government has to spend money on purchases more beneficial than what “the rich” would have done with the money.
I support lower tax rates and less government spending, not because it helps rich people, but because it helps all people.
Ogbunu continues, “America is simply not ready for elaborate bill packages and major structural overhauls that would guarantee health equity for all.”
Sadly, no such bill exists. If it did, I would vote for it.
The physics of human nature say it can’t.
Legislation that claims to guarantee “health equity for all” is nothing more than an exercise in good-feeling by politicians.
These laws only give politicians an excuse to ignore problems that persist, despite their legislation of good intentions. I can hear her say, “I already passed a bill to solve that problem.”
Again, we have spending without solutions.
When the government takes more money than it can spend effectively, it hurts growth and the pie stops growing.
Maybe that’s why people are so concerned about how much pie is on their plate.
People get healthier because of the innovation, wealth and freedom that accompany economic growth. The greatest source of increased health is greater prosperity.
I have long wondered, what is it that the rich do with all their money? Why do they need so much money in the first place?; to have a fat bank account, to exert power and influence over others, to feel superior to others, or to contribute to the well-being of others? How can somebody feel good about taking home a huge pay check, knowing that individuals working for them are struggling to pay their mortgages, to pay for education for their children, to pay their medical bills? How can these people rest easy at night? Research comparing those with greater means versus those with lessor means, consistently finds that those with greater means contribute a lower percentage of their income to charity. http://www.nytimes.com/2010/08/22/magazine/22FOB-wwln-t.html. The explanation for this I think is that when you are physically and socially removed from others’ suffering it is easy to not care and to rationalize that they are somehow less deserving. If those at the top of the pyramid had to walk in the shoes of those with less, or left their gated communities to walk, talk and yes– even befriend others living in poverty—perhaps they would feel greater empathy and want to do more for others.
In general (other than exceptions such as inheritance), having a lot of money is not a sign of ‘needing’ it. Having a lot of money is a sign of providing a lot of value. When someone pays me a salary (or engages in some other transaction) they believe the work I am doing is worth more than the money they are paying me. Rich people (again in general) do not set out to be rich, but to provide value.
The other point I think you are missing is that wealth is not only valuable to the person who owns it. Wealth supports capital, which makes the labor of workers more valuable i.e. allows them to earn more.
I think you have it backwards- workers CREATE capital, which allows the wealthy to profit from it.
Workers create capital, which makes them wealthy.
Wage of sweatshop workers making iPads- $100/ month
Salary for new Apple CEO- $384 million http://betanews.com/2011/08/26/apple-ceo-tim-cook-gets-384m-payday/
*repeat ad nauseam*
The wealthy in our society, the 1%, or .01%, don’t seek to provide value. They extract value from workers for their own personal gain. They’ve shown this through foreclosures, predatory loans, health insurance denials, and more. Free market healthcare has no incentives to keep people healthy. The profit comes from treating the sick, not preventing illness or finding cures.
You create straw-man arguments about the inefficiency of government, but ignore that Big Business has an inordinate amount of influence on these same politicians. We need to reduce the amount of influence the wealthy have on politics so that we can create a healthcare system that works. Right now, our privatized system is failing us.
I agree that businesses have political influence. They often profit from government self-dealing and subsidies. That is why I argue the government should spend less, not more. We both agree it spends money on stupid things like corporate welfare and other subsidies.
The main reason why people spend money to influence politics is because the government spends so much money. If you want to get money out of politics, put less money into government.
Your response illustrates my point. Somehow you think that people’s salaries are equivalent to the value they bring to a company. Yet, simply by owning a company (often started with inherited wealth or borrowed funds from family or wealthy friends)—means that the products of the labor of those who work for that company—belong to you. So a person working for that company who invents a new product while working there is actually the one adding to the value of the company. Yet, the person who owns the company generally reaps a far greater proportion of the reward—and even takes credit for that person’s work. Similarly, manual laborers, who physically exert effort and endure suffering–generally long hours, physical hardship, discipline required to maintain consistent attention to often mundane repetitious tasks–are considered to have 1/300th or less value than the CEO who sits in a boardroom, hosts fancy lunches and dinners, schmoozes with high-power associates, brings in consultants to tell him how to squeeze more productivity out of the faceless, nameless workers. The belief that some people bring so much more value than others to a company—is really a egoistic fantasy of those with wealth and privilege (or of those who value the acquisition of wealth and privilege over all else). That is not to say I don’t value what it takes to build a company—But I believe other structures–e.g. cooperative ownership & shared distribution of rewards–should be the norm. Instead of focusing our best & brightest resources (if you consider business leaders to be that) on how to create profit for their shareholders—let them focus on how to build a better, healthier world for everyone.
Your analysis has several interesting observations but I’m really confused about how the pieces fit together. Maybe my confusion begins with why the federal government is cast as Robin Hood rather than as the King and the Sheriff representing the King’s interests in Sherwood Forest, if I remember the story correctly. So, the federal government and your rich elite capitalists are the King. I would probably cast middle-class advocates for the poor peasants as Robin Hood (unless you have something against Robin Hood?). In the Robin Hood story there isn’t really any role for you, other than as one of the rich and powerful elite because the story includes no debate about whether or not Robin Hood was justified in redistributing the King’s wealth to the poor peasants.
If you want to write the sequel, where Robin Hood becomes King, and all the administrative issues and political compromises endemic to making up the rules for how wealth will be redistributed, then your comparisons to the federal government become more appropriate and useful. Just, please, don’t make it a short story where you cynically tell us that a King Robin Hood would suddenly convert to a character who shares your views, deciding the only way to improve the peasants’ wealth is to leave the rules in place that will help increase the wealth disparity. That’s not the story of Robin Hood, that’s the story of Saddam Hussein, or some other ruthlessly entrepreneurial totalitarian dictator.
Thanks for your comment. It looks like you know more about the legend of Robin Hood than I do and that has led you to overthink my point.
As I understand it, Robin Hood stole from the rich and gave from the poor. He did it for their good and not his own, although he did become famous for it.
The point I am trying to make is this: government does not steal from the rich and give to the poor i.e. it is not Robin Hood.
Instead, government takes from the rich (actually, most people). Then it takes a cut for itself (politicians, special interests and bureaucrats) and gives some leftovers to the poor, often in a form that is not (the most) useful to them.
Does this help? Sorry for the confusion.
You didn’t respond to the second paragraph. Perhaps you missed my point.
Sorry. I am not sure I follow the second paragraph. I tried to explain that in my previous comment. It would be one thing if the government was Robin Hood (stealing from the rich and giving to the poor), but I am not much interested in having the debate about whether that would be good or bad because it just isn’t reality. The government takes money and spends it in a number of inefficient ways. Often it tries to claim or look like it is helping the poor and some people within the government may really want to help the poor.
In other words, I am not writing the sequel where Robin Hood becomes king. I am describing the reality where Robin Hood isn’t king.