Below is a short comment from my friend Ike Brannon of Capital Policy Analytics [4]. Ike is one of the sharpest fiscal analysts in Washington, but also has a litterary bent. We certainly agree on issues related to economic growth and taxes, one reason why I decided to share his comment on author Thomas Piketty. I use my copy of "Capital in the Twenty First Century" as a door stop, largely because the 577 page tome is unreadable, but that does not mean Piketty's work is without influence. As economist and historian Diedre McCloskey [5] notes in her 55-page deconstruction of Capital: [6]
"Reading the book is a good opportunity to understand the latest of the leftish worries about “capitalism,” and to test its economic and philosophical strength. Piketty’s worry about the rich getting richer is indeed merely 'the latest' of a long series back to Malthus and Ricardo and Marx. Since those founding geniuses of Classical economics, a trade-tested betterment (a locution to be preferred to “capitalism,” with its erroneous implication that capital accumulation, not innovation, is what made us better off) has enormously enriched large parts of a humanity now seven times larger in population than in 1800, and bids fair in the next fity years or so to enrich everyone on the planet."
Enjoy,
Chris
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Ike's tax missive, 10 July 2015
In case anyone was wondering where Thomas Piketty stands on the question of massive income redistribution he erases that ambiguity in a New York Review of Books essay that prattles on [7] about the brilliance of British economist Anthony Atkinson’s new book on the topic of inequality.
Am I being unfair with my verb choice here? I don’t think so: After an introduction that places Atkinson somewhere between Keynes and Mahatma Gandhi in the pantheon of liberal heroes (“His contribution to the theory of optimal taxation alone deserve several nobel prizes.” Please.) he gets to the heart of the matter: Thatcher was a twat, Reagan an unfeeling simpleton, and together they unleashed forces that have immiserized the masses in the last three decades. He laments Thatcher’s reducing the top tax rate to a mere 40% as well as the 1986 tax reductions in the U.S. that left the top tax rate at a mere 28%, which--he laments--not even his Democratic successors have seen fit to raise, you’ll be interested to learn.
Atkinson has the elegant solution to what ails Anglo-America: A top rate of 55% over $100,000 and 65% over $200,000, to be used to fund an expansion of Social Security and a massive redistribution. Boosting Social Security is a noble sentiment, the left loves to tell us, but since the New York Times (!!) recently copped to the fact that [8] that the elderly now have a much higher standard of living than the rest of us, maybe such a redistribution won’t accomplish all that its advocates desire.
Peter the Great liked to confiscate successful businesses and put the owners to death: I’m waiting for a sympathetic PBS biography of him to appear lamenting how misunderstood his business philosophy was.
Piketty’s interview last month in the Lunch with the FT [9] (which is almost as much fun as Saturday’s WSJ Review section) is also illuminating: France took about ? of his income last year, which he’s fine with, and he sees no negative economic consequence of a 90% tax rate. He’s one of the few people who’ve been a part of this interview series whom I would definitely not want to dine with. “Bill Gates didn’t invent the computer! He’s not entitled to those billions!” I would rather go hungry than listen to an hour of such tripe.
Here’s a quasi-Turing test to determine who’s being a rational policy wonk and who’s merely a partisan hack: If someone said that a politician is going to do something that will increase both economic growth and income distribution and that, in the thirty subsequent years, the consumption of the median household will nearly double, would you do it? Would you also need to know how it affected the income of the top one percent? If so, why? If the answer were that their income will go up much faster, would that cause you to withdraw support? I know what your answer is, I suspect, since if you didn’t find that notion to be nonsense you’d be reading Jared Bernstein’s diatribes instead of mine, but it’s a good question to put to the nomenklatura.
Why should any of us care what’s happening in the one percent, for that matter? If we looked merely at the bottom 99% and the results showed that incomes were going up and inequality was mildly increasing would that be okay? So what if we parachute dropped a couple million rich families into America?
Thomas Babington Macauley observed the same blockhead logic a century ago when he observed that:
“And yet it may then be the mode to assert that the increase of wealth and the progress of science have benefited the few at the expense of the many, and to talk of the reign of Queen Victoria as the time when England was truly merry England, when all classes were bound together by brotherly sympathy, when the rich did not grind the faces of the poor, and when the poor did not envy the splendour of the rich.”
Ike Brannon is President of Capital Policy Analytics, a consulting firm in Washington DC.