For years, the rock star economist for the political left was Nobel Prize winner Paul Krugman. His endorsement of taxing wealth and encouraging massive government spending -- as a means of driving the economy -- has been music to the ears of all those who love and worship big government. Now, the left has found a new leader to follow. He is a French economist by the name of Thomas Piketty. The recently released English language version of his book -- Capital in the Twenty-First Century -- has every socialist-minded politician and media type going gaga over his proposed solution to income inequality.
Essentially, Piketty believes that capitalism -- and democracy -- is doomed to collapse because it creates an ever increasing disparity between the rich and the poor. It does this because, over time, capitalism spawns a faster growth rate in the return on capital investment versus any real growth in wages. Thus, the rich, by using their wealth as investment, are able to grow their status much quicker than the majority of citizens. So, Piketty's solution to this fatal flaw of capitalism is to force the rich out of existence by imposing an 80% tax on incomes above $500,000 and a 50-60% tax on those with incomes between $200,000 and $500,000. This way there will be no rich and our democracy will be saved.
But, then there's this: What if society is actually able to eliminate all of that rich class? What then?
Well, first of all, all those people who had careers that support the rich would lose their jobs. Jobs such as the staff of upscale restauranteurs, landscapers, caterers, housekeepers, expensive fine artists and craftsmen, boat and private airplane builders, and so many others. Then, too, high taxation of the so-called "rich" will only reduce overall spending. Since our economy is 70% driven by consumer spending, we would be sure to fall into a recession. Additionally, the $200,000-and-above crowd are givers. Not necessarily in direct charitable giving, but as the primary supporters of the arts and culture in America. They are a dominant source of non-Pell grant college scholarships and fellowships. Most private colleges and hospital expansions would not happen if it weren't because of their generosity. Without outside donations, does anyone think that a religious college or university would receive a grant from the federal government? Not with the ALCU jumping in to cite the separation of Church and State.
More importantly, the rich provide an essential economic benefit to society by providing the seed money to promote the development of inventions, new products and new businesses; all of which create new jobs. Under Piketty's flawed beliefs, the concept of wealth investment would simply cease to exist. And, don't think for one minute that the government, with all that new found money is going to pick up the torch and act as America's new Venture Capitalists. All it would do is fuel more crony capitalism so that we wind up with endless failed ventures like Solyndra.
The problem I have will people like Piketty is that they never once have a solution that elevates people out of poverty. Their answer is to always attack the rich; as if they are somehow the wealth takers and not the wealth creators. Economists aren't sociologists; but, they should be. Only then would they understand what the real reasons are for income inequality. Totally missing in most left-wing proposals is the concept of income mobility where 80% of the of the rich, today, are first generation millionaires; and, in as little two generations, much of that wealth (60%) will be gone. At the same time, nearly 85% of all Americans have wealth greater than their parents. Studies have also shown that between 86% and 95% of all those who were once living in poverty would shed that condition in as little as 15 years. The bottom line is that people, whether they be rich or poor, are likely to reverse that status, through their own initiative, in just a few years. Because of capitalism, poverty is not necessarily a permanent condition.
If Mr. Piketty is so sure of his beliefs, he should implement them in his home country of France and then we'll see what that country looks like in, say, 5 or 10 years. Lastly, Picketty's book is so hot that 80,000 copies were sold in just two months and it is now back-ordered. Apparently, it is a must read among all socialist Democrats. At a list price of $39.95, it's pretty pricey. So, I guess it's Mr. Piketty's goal to get rich before anyone can impose that 80% tax on his rich-guy income.
Thomas Piketty Revives Marx for the 21st Century: http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592
Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again How the French tome has rocked the tiny Harvard University Press : http://www.newrepublic.com/article/117498/pikettys-capital-sold-out-harvard-press-scrambling
The Facts About Income Mobility: https://www.youtube.com/watch?feature=player_embedded&v=vDhcqua3_W8
29 Valuable Facts About Millionaires and Billionaires: http://facts.randomhistory.com/millionaires-facts.html