The Responsibility of the Rich

"It is the responsibility of those who have much to help those who do not."

This was a comment made to me by a co-worker after our conversation about the unbiased nature of major new organizations, including Fox News, turned to the Fairness Doctrine, and then to economics. And this is a comment that I wholeheartedly endorse. In fact, most Americans regardless of political stripe would agree with this statement. The disagreement comes about when the discussion turns to how this should be accomplished.

My co-worker is, I found out, a staunch opponent of Reaganomics. His belief is that the boom of the 90's was a result of a combination of tax increases from the late 80's implemented by George Bush and Bill Clinton's economic policy. His belief is that those who are wealthy are so because they have the discipline to keep the money that they make rather than spending all of the money that they make.

On the flip side, he also believes that if poorer people are given money, that they will in turn pump it back into the economy through spending. His example was that if a child is continually given candy, they will not save the candy but continue to eat it as fast as they can get it.

All of his beliefs are somewhat true. However, these are not substantial arguments to support that Reaganomics is bad and tax increases are good for the economy.

Wealthier people do develop a discipline to save money rather than spend it on consumer goods. However, consumer goods is only one side of the economic equation. Wealthy people do not come about wealth by sticking their money under a mattress, but rather, they invest it to make more money. Those investments in business ventures generate jobs for people, like myself, who either do not have the guts, resourcefulness, or intelligence to take the risks of capital ventures.

And let us not confuse wealthy people with high income earners. Income such as interest, dividends, and capital gains are passive or unearned income. It is possible to earn high income and not be wealthy. Several NFL football players earning millions of dollars a year have filed for bankruptcy protection during their playing career.

If I give my child candy with nothing but the expectation that I will give him more later, he will surely consume the candy quickly without another thought. But if my child earns his candy, he will be more careful how he invests the consumption of the candy. And if he finds that he can earn more candy than will be given to him otherwise, he will find ways to earn the candy.

The argument that taxing high income earners to redistribute to the poor is good for the economy is also, in a sense, putting the cart before the horse. For when investors have no capital to invest in production, or the cost of investing in production is not worth the return, then production is either ceased or moved to a more profitable location. The tax structure of the U.S., along with socialist economic and labor policy, are the very reasons why manufacturing is moving offshore.

And the evidence of this can be seen all over Europe. Outside of some cars and wine, when have you bought something that was manufactured in Europe.

Not to dismiss service industries, but manufacturing and production of goods fueled by capital investment are the backbone of economic growth.

And in terms of charity to the poor, study after study has shown that states that have lower taxes give much more to charity. States with more socialist viewpoints and higher taxes give less. And the evidence of the decline in the economic health of those states, such as Michigan and Maine, is overwhelming.

History also shows that the most prominent philantropists were capitalists.

So, while it is the responsibility of those who have to help those who have not, the onus is on the individual to do so. Government policy confiscating money from high earners under this guise has staggering detrimental consequences.