Liberals (and here I will be generous and even include the center right krewe at the New Republic) have a weakness for the idea that income distributes wealth downwards. In this takedown of the conservative claim that income inequality hasn’t increased in the past thirty years, Matt O’brien writes:
“Pethokoukis [the AEI economist} thinks that a more thorough accounting for taxes and benefits like healthcare or pensions yield a different picture of inequality. And that is somewhat true. After-tax inequality is certainly smaller than pre-tax inequality. But it is not as true as it used to be. The CBO recently confirmed that federal taxes and transfers are less redistributive now than they were in 1979. The same is true for benefits.”
Into this picture, ladies and gentlemen, let me present two very simple concepts. One is the monopoly premium granted to corporations by that wonderful invention called intellectual property rights. The other is that equally wonderful invention called government guarantees for the financial and big business sector. It has slipped our minds, perhaps, that the Fed spread out loans totaling 16 trillion dollars at one percent and below to our high flying investors, lending a helping hand to hundreds of hedge funds, banks, and businesses. Now, to get that kind of loan normally, the charge, in the 2008-2010 period, would have been probably 4 points higher on those loans, and in many cases the price would have soared to the interest charged on Greek bonds. So, let’s see, handy calculator please: if we are talking four percentage points, 16 trillion, that’s, scribble scribble, about 600 billion dollars. Wow, nice, eh? I’d jack that up a bit, considering the collateral that was offered. So 600 billion to 800 billion was pocketed by the wealthiest in 2 years – hey, really sweet!
I suspect that there is not a fortune among the upper 1 percent that has not gained an extra million or ten from the government’s wonderful largesse in these troubled times.
So please, spare me the tales of the downward distribution of money by Uncle Sam. That is the myth.
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3 comments:
Roger, could you point me towards a link breaking down and explaining the $16 trillion figure? I believe you linked to a piece on this awhile back, but cannot find it.
Thanks!
Phil
So what would happen if taxpayers were allowed to directly allocate their taxes among the various government organizations? Would the allocation be worse, the same or better?
Phil, here's the link to the Gao report: http://publicintelligence.net/gao-federal-reserve-16-trillion-emergency-bailout-loans-audit-report/
To find the documents released by the Fed takes a little doing. I did so by, I think, going through a bloomberg link to the zip file. And the files are quite confusing. But they are interesting to go through.
Xerographica, I can't really say what the direct allocation would be - it would, after all, change over time. Certainly, I think if the Government set up a system of taxes and regulations for corporations such that they would be severely punished for compensating the upper management in such antebellum disproportion to the rest of their work force, that the corps would disgorge more money to the work force, i.e. wages would rise. This goes against the neo-classical notion that labor is a perfect market. It is, I think, at best a mixed one.
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