Democrats & Liberals Archives

Trillions & Trillions

This year, the wealth of the top 400 richest people in America fell by $300 billion, leaving them with a paltry $1,270,000,000,000 to play with. (That’s $1.27 trillion, if you prefer.)

To put that number into some kind of comprehensible context, let's say you started spending $1M a day on the day Jesus was born, and carried on spending every single day without fail. Without even factoring in any interest, it would take you until October 2737 to finally piss away the last of your money

Put another way, a trillion dollar bills laid end to end would stretch almost 93 million miles to the sun.

Put the most important way of all, $1.27 trillion is enough to provide a $30,000 salary to four million, two hundred and thirty three thousand, three hundred and thirty three workers for a year.

Four and a quarter MILLION people.

Now I know that my critics will point out that dumping $1.27 trillion of stock in one go would devastate the economy, but that's not my point. I'm not suggesting these incomprehensibly rich people should just give away their assets. I just question whether a society that allows this kind of frankly obscene discrepancy in wealth can possibly survive.

It has been postulated by thinkers such as Jared Diamond that the Mayan and Incan civilizations collapsed partly because rulers became so obsessed with gathering trinkets and gold that the number of people farming and providing infrastructure services dwindled to unsustainable levels as the rest of the population went forth to wage war in the name of gathering wealth.

The number of taxpayers in the USA is approximate 138 million, or 46% of the population. When 400 people could pay the wages of the entire working populations of TEN STATES, (Wyoming (245,000), Vermont (286,000), North Dakota (295,000), Alaska (316,000), South Dakota (370,000), Delaware (402,000), Montana (445,000), Rhode Island (483,000), Hawaii (593,000) and New Hampshire (605,000)) for a total of just over four million workers, something is surely very, very, very wrong.

Posted by Jon Rice at September 30, 2009 8:21 PM
Comments
Comment #288714
When 400 people could pay the wages of the entire working populations of TEN STATES…

Just so we’re clear about this, how many states-worth (population-wise) do the richest 400 people pay the wages of? I’m sure it’s quite a large number even if you’re just looking at who they pay directly. But beyond that, since the filthy rich don’t have their money sitting in their checking accounts but have it invested in companies and other investments the number would have to be much, much larger, and probably larger than the numbers you mention.

Posted by: Paul at September 30, 2009 9:32 PM
Comment #288715

Jon,
Why $1.7 trilion may sound like a lot of money and $300 billion divided by 400 people means that together they loss less than a billion each, I do believe that when you break it down even the ultra rich took a hit in this economic slowdown.

For why we could put 15 million people to work within a few days at minimum wage, unless and/or until the Energy (fossil fuel) Problem is solved do you realize the top 400 people could stand to lose another $300 billion or more. And than how many states could they mot own?

Posted by: Henry Schlatman at September 30, 2009 9:45 PM
Comment #288717

You or I could have been one of those 400 if we were smart enough but alas we weren’t. If they made their money honestly and fairly, why is it obscene. The Kenedys were very rich, John Kerry married into money, are they obscene?

Posted by: KAP at September 30, 2009 9:54 PM
Comment #288718
Put the most important way of all, $1.27 trillion is enough to provide a $30,000 salary to four million, two hundred and thirty three thousand, three hundred and thirty three workers for a year.

Again, this $1.27 trillion IS paying people’s wages. That’s way too much cash to have sewed up matresses. It’s also sending people to college, providing mortgages, and maintaining businesses that we depend on for jobs and security, not to mention tax revenues and the goods and services this money generates. Take all that away so people can get a paltry $30,000 “for a year” and what happens when the year is over? Hmmm…

Posted by: Paul at September 30, 2009 9:56 PM
Comment #288721

KAP,
Sorry to burst your bubble, but most of the really rich people inherit their wealth. It has nothing to do with intelligence or hard work.

Some of the original money earners come by it honestly. Others do not. The Kennedy fortune came from bootlegging and stock market rigging. Kennedy’s short selling played a significant role in the stock market crash of 1929. The children inherited the wealth.

Kerry married into the Heinz fortune.

I don’t think there is anything wrong with inherited wealth. There is nothing really right about it, either. We all want to pass on financial security to our descendants. However, I do not think an inheritor has earned or deserves the wealth. It’s an accident of birth. Over the long run, left unchecked, it creates an aristocracy, with a disproportionate amount of wealth concentrated among a very small number of people.

Posted by: phx8 at September 30, 2009 10:24 PM
Comment #288722

Inherited wealth and aristocracy is what makes up the wealth of old Europe.

Posted by: beretta9 at September 30, 2009 10:30 PM
Comment #288724

Because of the nature of what they actually are, I’m not troubled at all by these very large fortunes. As long as we have a capitalist system, all of that money is circulating and available for the benefit of all.

When you consider large fortunes, as far as the rest of us non multi-millionares are concerned, it doesn’t make one whit of difference whether 10,000 very rich people have that money or just 1 extremely rich person does.

If you consider somebody like Warren Buffett, a very, very small percentage of “his” money is actually being used by him personally, and even that is still circulating. You can live the same lifestyle as somebody like Buffett on an extremely tiny fraction of what he’s worth, and many do. Once you get past a certain net worth, the dollar amounts are nothing but numbers, and all that money is out there circulating, paying salaries, being borrowed for school or home loans, etc.

Posted by: Paul at September 30, 2009 10:55 PM
Comment #288727

Just for balance nearly half of Americans pay no Federal Income tax at all.

Not sure how wise that is in a democracy.

Posted by: Craig Holmes at September 30, 2009 11:48 PM
Comment #288728
When you consider large fortunes, as far as the rest of us non multi-millionares are concerned, it doesn’t make one whit of difference whether 10,000 very rich people have that money or just 1 extremely rich person does.

What if an entrepreneur wants to start a company and needs a loan/financial backing to jumpstart his/her venture? If all the wealth is concentrated in one person, then if that one person isn’t willing to invest; in that case the entrepreneur’s idea never comes to fruition. If the wealth is spread amongst more people, there are more opportunities for people to obtain captial. If person A doesn’t provide support, then perhaps person B will.

Posted by: Warped Reality at September 30, 2009 11:54 PM
Comment #288729
Just for balance nearly half of Americans pay no Federal Income tax at all.

Not sure how wise that is in a democracy.

A quarter of the US population consists of children. Another 13% is aged 65+, leaving only 62% of the population to be working age adults. Considering that the poverty rate is about 13%, it makes sense that about half of Americans paid taxes.

Population Reference

Poverty Rate Reference


I know some people aged 65+ pay taxes, but this is just an estimate.

Posted by: Warped Reality at October 1, 2009 12:12 AM
Comment #288731

What percentage of the population are illegal? They don’t pay taxes and they are a drain on those who do.

Posted by: beretta9 at October 1, 2009 12:21 AM
Comment #288732

If the 13% of 65+ were eliminated, we wouldn’t have to worry about the SS paid out to them and the cost of their health care. I’d say most of the health problems are with this group. They don’t really do anything constructive for the country.

Posted by: 3rdpty at October 1, 2009 12:28 AM
Comment #288734

Many illegal immigrants DO pay taxes. 2.1 million taxpayers used ITINs in 2005. About 10 million undocumented immigrants are thought to live in the US. I have no idea if the illegal population is more or less likely to be under 18 or over 65, but a quarter of them pay taxes.

Posted by: Warped Reality at October 1, 2009 12:41 AM
Comment #288735

Correction:
I just realized that 2.1 out of 10 is more like a fifth than a quarter.

Posted by: Warped Reality at October 1, 2009 12:42 AM
Comment #288745

Why don’t you tell the rest of the story. That is of the 400 richest people that only 28 of them made any profit. All the rest lost money.
Bill Gates lost over 1 billion his self. I am sure that could have provided a few more jobs at Micro soft. I used to work for a person that was worth over $300 million and one day we were talking and he told me he was broke. All that money was in real estate and on paper and paying the wages of over 500 people comes out of his pocket. So just because they are worth millions doesn’t mean it is sitting in their pockets collecting dust. All the money that the goverment spent in the last year and next year could pay every person over $40,000. Ten trillion Dollars is all that is needed. Or to put it another way for the government to spend 10 trillion every person must pay $40,000. How much tax did you pay last year….

Posted by: papioscarw at October 1, 2009 6:49 AM
Comment #288746

Who cares what percent pays what percent, has long as it is “fair” in what that person is paying. Is it fair for general Americans to pay for military expenses? No. The military that we have today does not really provide that much protection to the “average American”. Please note this is not an insult to the troops they do a great job, but it’s not their function to protect the average person. Most military protections are offered to corporations and wealthy interests. So they should be the one paying most of the bill. When it comes to medicare and SS the middle and poor pay the most in this tax in terms of percent, and the poor and middle class get the most out of it. In general the more you are able to take advantage of the system of government that you have the higher taxes you should pay based on those advantages.

Now do I care if I pay more taxes to certain things than other people…. it depends on what it is and how effective it is used.

Just my Opinions below.
Flat tax no. Sales Tax on food, beverage, medicine, and shelter, again No.
Income Tax sure.
Fee tax sure. (post office stamps)
Property tax sure.

Posted by: kudos at October 1, 2009 7:07 AM
Comment #288748

If ever there was a case of wealth envy, you sir, take the prize.
You epitomize the left harping on the evil rich.
The truth is, this is still a country where anyone can still become very wealthy with a little imagination, hard work and yes, some good luck.
You are most likely someone who in their adult life has not held a job. You work as a community organizer, see Barack Obama, or in a school or goverment job of some nature.
Get a life

Posted by: Jim at October 1, 2009 9:53 AM
Comment #288749

The trillions that matter are the trillions wasted buying oil. Instead of cash for clunkers, there should be a program to switch out the engines for hybrid engines, and then a few years later to full electric. Everything was more prosperous and equal before Iran and other countries were told by Kissinger to add the price of purchasing military hardware from us into the price of their crude. People should be a lot more concerned about Americans dying for oil, than people losing net worth because of share prices.

Posted by: ohrealy at October 1, 2009 10:51 AM
Comment #288750

To answer the two direct questions raised by my critics:

Papioscarw, I paid over $42,000 in taxes last year.

Jim: it’s possible to see the wrongs in a system without being jealous of those who have too much. I have a very good income as a director of a $160M company, and it’s enough for a very nice life for me and my family. I think it’s very telling that you scoff at the idea of working for the government or, especially, a school. I guess those who choose public service over private enterprise are to be mocked for their stupidity.

Posted by: Jonathan Rice at October 1, 2009 10:59 AM
Comment #288751

jon

another way of looking at it would be that this wealth is not cash sitting in bank. it is equiptment, payroll which represents jobs created by this wealth, and many of the other positive effects on our economy. to make it sound like these folks are sitting around with 1.27 tril. in cash in the bank is narrowminded way of looking at it, and patently unfair. how many people in this country have the talent and ability to achieve this type status.

Posted by: dbs at October 1, 2009 11:14 AM
Comment #288752
Again, this $1.27 trillion IS paying people’s wages. That’s way too much cash to have sewed up matresses. It’s also sending people to college, providing mortgages, and maintaining businesses that we depend on for jobs and security, not to mention tax revenues and the goods and services this money generates.

I don’t believe that at all. Spending actually does all that.

If money accumulates in limited places, it can be a problem; and guess what - it’s all accumulating in China.

Posted by: Schwamp at October 1, 2009 11:15 AM
Comment #288754

For all those people who keep telling me that all this money is gratuitously washing around the economy thanks to the largess and magnanimity of these billionaires, I have just three words: Swiss bank account. Oh, maybe four more: Grand Cayman tax haven. Or, even a few more: offshoring jobs to India, China and the Philippines.

Yep, all that money is definitely helping the average Joe… we should be grateful that the 400 wealthiest are supporting the American economy so stridently.

Posted by: Jonathan Rice at October 1, 2009 11:30 AM
Comment #288756

“Property is the fruit of labor. Property is desirable, is a positive good in the world. That some should be rich shows that others may become rich and hence is just encouragement to industry and enterprise. Let not him who is house-less pull down the house of another, but let him work diligently to build one for himself, thus by example assuring that his own shall be safe from violence. I take it that it is best for all to leave each man free to acquire property as fast as he can. Some will get wealthy. I don’t believe in a law to prevent a man from getting rich; it would do more harm than good.”

Abraham Lincoln

Posted by: Royal Flush at October 1, 2009 11:50 AM
Comment #288757

Royal Flush - I’m not anti-capitalist, not at all. I believe in Lincoln’s words fervently. I’m just not sure he could have foreseen a gap between the ultra-rich and the rest of the population that is in fact a chasm. I don’t believe in a law that would prevent someone getting rich… but I DO believe that there is such a thing as too rich. It’s like apples: apples are good for you, until you eat five thousand of them, and then you’re going to be sick. That’s what is happening to capitalism in this country - it’s too much of a good thing for the super-wealthy. And it’s sickening our culture and economy.

Posted by: Jonathan Rice at October 1, 2009 12:18 PM
Comment #288764
Sorry to burst your bubble, but most of the really rich people inherit their wealth. It has nothing to do with intelligence or hard work.

Another liberal myth, actually the majority of wealthy earned their money.

PHILADELPHIA, April 10 /PRNewswire-FirstCall/ — An overwhelming number of
affluent Americans earned their wealth and are more likely to feel secure
during challenging economic times compared to peers who inherited their money,
according to findings by PNC Wealth Management, a member of The PNC Financial
Services Group, Inc. (NYSE: PNC).
PNC’s fourth annual Wealth and Values Survey revealed that 69 percent of
Americans with $500,000 or more in investable assets accumulated most of their
fortune by earning it through work, business ownership or investments. This
compares to the 6 percent who attained their wealth primarily through
inheritance. The remaining 25 percent gained their wealth through a
combination of inheritance and earnings.

Posted by: Kirk at October 1, 2009 3:04 PM
Comment #288765

Jon… your article would have more impact if, instead of just complaining about wealth distribution, you offered up some kind, ANY kind, of solution to your perceived problem. But all I can see in your post is complaining that the rich are too rich… and?

Posted by: Doug Langworthy at October 1, 2009 3:10 PM
Comment #288766
The number of taxpayers in the USA is approximate 138 million, or 46% of the population. When 400 people could pay the wages of the entire working populations of TEN STATES,…for a total of just over four million workers, something is surely very, very, very wrong.
but I DO believe that there is such a thing as too rich.

John, just how much wealth do you think a person should be allowed to accumulate? At what point do we say you are “too rich” so you can have no more.

Posted by: Kirk at October 1, 2009 3:16 PM
Comment #288767

Arbitrary confiscation of wealth on the basis of someone having to much is abhorrent to all the philosophies of our founders. It’s one thing to tax earned and unearned income at high levels, but quite another to steal what one already has.

Posted by: Royal Flush at October 1, 2009 4:01 PM
Comment #288769

To answer the two direct questions raised by my critics:

Papioscarw, I paid over $42,000 in taxes last year.


Well J.R. You paid in 1 year what I make gross in 3 years. I think the Goverment should come and take it a way from you and give it to me. Thats what you are saying. I’m not rich and I don’t consider myself poor. I just have to live within my means. I have a roof over my head, I have food, I drive an old 1976 pickup, I own my own ham radio station, My pets are from the Pound and they are fed. Sure I would Like to have a new Corvette, a 4 bedroom house, eat at the Steak house, wear the latest fasions, have the latest and fastest computer or even own the luxery of a laptop computer, BUT you know what I AM Very glad to have what I have and I know that there are others a lot worse off then me. I can also be happy in the thought nothing that I own was given to me I had to work and pay for it myself. You won’t find me at Bill Gates door step saying gim me gim me I’m poor, spread the wealth.
papioscarw…

Posted by: papioscarw at October 1, 2009 5:06 PM
Comment #288770

The trillions we pay for oil circulates back to the largest banks, investment houses, corporations, and brand names that some guys in a fake tent may have heard about. The duopoliticians end up with their share as a cost of doing business here. This whole process allows the big guys to keep swallowing up the little guys, stifling inventiveness and bringing progress to a standstill. It’s the 21st century, we can do better than what we have now.

Posted by: ohrealy at October 1, 2009 5:32 PM
Comment #288772

Jon,

This says it, and gives some back-up for what you are saying. It never hurts to look at history. The folks who payed the high taxes mentioned in this piece, never missed the money, and neither would those 400 today…

It’s great to know that during the worst economic crisis since the Great Depression, the wealth of the 400 richest Americans, according to Forbes, actually increased by $30 billion. Well golly, that’s only a 2 percent increase, much less than the double digit returns the wealthy had grown accustomed to. But a 2 percent increase is a whole lot more than losing 40 percent of your 401k. And $30 billion is enough to provide 500,000 school teacher jobs at $60k per year.

Collectively, those 400 have $1.57 trillion in wealth. It’s hard to get your mind around a number like that. The way I do it is to imagine that we were still living during the great radical Eisenhower era of the 1950s when marginal income tax rates hit 91 percent. Taxes were high back in the 1950s because people understood that constraining wild extremes of wealth would make our country stronger and prevent another depression. (Well, what did those old fogies know?)

Had we kept those high progressive taxes in place, instead of removing them, especially during the Reagan era, the Forbes 400 might each be worth “only” $100 million instead of $3.9 billion each. So let’s imagine that the rest of their wealth, about $1.53 trillion, were available for the public good.

What does $1.53 trillion buy?

It’s more than enough to insure the uninsured for the next twenty years or more.

It’s more than enough to create a Manhattan Project to solve global warming by developing renewable energy and a green, sustainable manufacturing sector.

And here’s my favorite: It’s more than enough to endow every public college and university in the country so that all of our children could gain access to higher education for free, forever!

Instead, we embarked on a grand experiment to see what would happen if we deregulated finance and changed the tax code so that millionaires could turn into billionaires. And even after that experiment failed in the most spectacular way, our system seems trapped into staying on the same deregulated path.

Instead of free higher education, health care and a sustainable economy, we got a fantasy finance boom and bust on Wall Street which crashed the real economy. We have our 400 billionaires, and we have 29 million unemployed and underemployed Americans. We have an infrastructure in shambles. We have an environment in crisis. We have a health care system that would make Rube Goldberg proud. And we have the worst income distribution since 1929.

I hazard to guess that each and every Forbes 400 member could get by with a net worth of $100 million. I don’t think that would kill their entrepreneurial drive or harm our economy—in fact it would be a major boon to the economy to step back from the edge of such massive concentration of wealth. The real problem is getting there form here. A wealth tax that kicks in when you become worth more than $100 million would be a good start. The Eisenhower tax rate on adjustable gross income over $3 million a year would help as well.

And please let’s not call it socialism, now that we’ve placed the entire financial sector on welfare to the tune of over $13 trillion in subsidies and guarantees. (By the way, the yearly budget outlays for means tested programs for low income citizens is about $350 billion per year. So Wall Street’s welfare is about 37 times as large as welfare for poor.)

So if narrowing the income/wealth gap isn’t socialism, what is it? It’s the America that thrived in the 1950s and 1960s. It’s the America that created a middle-class and vowed never to let the financial gamblers return us to another depression. It’s an America that put its people to work and built an infrastructure that was the envy of the world.

Where’s Dwight David Eisenhower when we need him?


www.huffingtonpost.com/les-leopold/the-forbes-400-shows-why_b_306228.html

Posted by: Marysdude at October 1, 2009 6:13 PM
Comment #288774

I believe that a pragmatic view is missing here.
The inherent danger in such a small percentage holding such a large portion of the available capital in our system is that at any point in time they can ” Turtle Up.”
Both sides agree that they create jobs, and opportunities, that the money they inject is important to our economy. Our system is actually skewed to ensure this continues.
Now for a moment imagine that this minority of a minority take thier toys and go home. The resultant panic and collapse would make last year look like boon times. I would go so far as to say that 95 percent of these 400 people would wind up in a stonger position after the dust settled than they were before.
If you are going to ask what my solution is…
I have none. Someone much smarter than myself will have to provide that.
I do believe this though, both Adam Smith and Karl Marx were wrong. And in my opinion (unlearned as it may be) for the same reason, both underestimate our capacity for avarice and greed. I am no exeception to that rule.

Posted by: Ted at October 1, 2009 7:02 PM
Comment #288775

well said papioscarw.

I find it odd that liberals are so convinced that the creation and keeping of wealth is evil. Where were they when all this wealth was being accumulated? Would we have the jobs and lifestyle we enjoy today that is the envy of the world if we had discouraged folks from becoming wealthy?

All this hand-wringing and envy is a trademark of liberals who would rather take from government than earn wealth on their own. I wonder if they even understand all the endowments and charitable giving by the wealthy. Had this wealth never been created…where would it be? In your pocket…in the governments pocket…no, it just simply wouldn’t exist. And, if it didn’t exist, what other schemes would you be conjuring up to get something for nothing?

Fortunes are being accumulated every day in this country by folks who get off their butts and work rather than sit on their pity pots and envy others.

How about being thankful for living in a country that gives all the opportunity to become wealthy. All this liberal sniveling is embarrassing.

Posted by: Royal Flush at October 1, 2009 7:05 PM
Comment #288778

According to data from the “Survey of Consumer Finances” Federal Reserve (2004), wealth is concentrated in the hands of a an extraordinarily small number of families in the US. The wealthiest 1 percent of families owns roughly 34.3% of the nation’s net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%. The data since 1983 suggest a trend of increased disparity.

A substantial portion of that wealth is held in assets that are not annually taxed and when translated into cash income any capital gain is taxed at a preferential rate. In addition, there are extremely favorable tax treatments for many tranfers of these assets (e.g.,inheritance).

We tax income, not wealth in the U.S. Perhaps we should re-examine that approach.

Posted by: Rich at October 1, 2009 8:07 PM
Comment #288779
Yep, all that money is definitely helping the average Joe… we should be grateful that the 400 wealthiest are supporting the American economy so stridently.

Well gee golly, let’s just take all that money away from those no good obsene folks and give it to the government. I’m sure it can spend it very wisely. Never mind that it’s already over $9,000,000,000,000 in debt andtrying to double it.
And yes! most that money is floating around in the US economy. But never mind that. Lets just take it away from those obsene rich folks so the economy can go futher in the tank.

Posted by: Ron Brown at October 1, 2009 8:12 PM
Comment #288781

jon

“I’m just not sure he could have foreseen a gap between the ultra-rich and the rest of the population that is in fact a chasm.”

how could that be? wasn’t there a handfull of wealthy industrialist that held a large amount of wealth during his lifetime. weren’t these the same people who were the ultra wealthy during the guilded age?

if this is true it would make that argument somewhat hollow, wouldn’t it?

Posted by: dbs at October 1, 2009 8:16 PM
Comment #288782

As others have pointed out, the rich are poorer this year than last because of the recession. In addition, inequality has decreased. I don’t feel sorry for them, but it does indicate how the economy works. It is fairly easy to make people poorer, but harder to make them better off.

Envy is a very powerful emotion that often masquerades as justice.

Posted by: Christine at October 1, 2009 8:22 PM
Comment #288784

rich

“A substantial portion of that wealth is held in assets that are not annually taxed and when translated into cash income any capital gain is taxed at a preferential rate. In addition, there are extremely favorable tax treatments for many tranfers of these assets (e.g.,inheritance).”

thats because those assets were purchased with money that has already been taxed. capital gains taxes are lowered to encourage investment, as opposed to letting it sit.

“According to data from the “Survey of Consumer Finances” Federal Reserve (2004), wealth is concentrated in the hands of a an extraordinarily small number of families in the US. The wealthiest 1 percent of families owns roughly 34.3% of the nation’s net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%. The data since 1983 suggest a trend of increased disparity.”

compare that to the portion of the annual tax burdon they also carry.

http://www.ntu.org/main/page.php?PageID=6

“We tax income, not wealth in the U.S. Perhaps we should re-examine that approach.”

why not just kill the goose? never mind the golden eggs it lays.

Posted by: dbs at October 1, 2009 8:32 PM
Comment #288786

dbs: the only figure in the 1850’s who illustrated the gap between rich and poor quite so well as now was Cornelius Vanderbilt. By the 1890’s people like Rockefeller, Carnegie and Mellon were watchwords for excess, but in Lincoln’s time there was really only one candidate.

Posted by: Jonathan Rice at October 1, 2009 8:37 PM
Comment #288787
Now for a moment imagine that this minority of a minority take thier toys and go home. The resultant panic and collapse would make last year look like boon times.

The flaw in this kind of thinking is that when you have huge amounts of paper assets, as these four hundred do, your assets cannot simply be cashed out and put in a safe. And why would you want to have billions of dollars in your safe anyway? The majority of that money is contractually tied up in loans and other investments, and if you do anything to contribute to the failure of whoever is borrowing your money, they go into Chapter 11 and what you get back isn’t anything close to what you put in.

blockquote>What if an entrepreneur wants to start a company and needs a loan/financial backing to jumpstart his/her venture? If all the wealth is concentrated in one person, then if that one person isn’t willing to invest; in that case the entrepreneur’s idea never comes to fruition. If the wealth is spread amongst more people, there are more opportunities for people to obtain captial. If person A doesn’t provide support, then perhaps person B will.

That isn’t how it works. Very rarely does an entrepeneur ever pitch an idea directly to any single wealthy individual. If you have the clout to make that happen (to get a personal audience with Warren Buffett, for example) then you’re already playing in the big leagues yourself. How it generally works is that you go to a bank or other financial firm, and the money you’re actually borrowing could be Warren Buffett’s, but it could also be from the retirement plans of middle class workers.

Posted by: Paul at October 1, 2009 8:53 PM
Comment #288790

Paul,
My what if is based the chance that they could get about 60 percent of net worth converted to hard assets before it bottomed. The economy would most likely contract to about 30 percent of it’s pre-crash value, leaving the losses adjusted out to major gains in the long run.
Is it likely to happen, no. However 10 years ago I thought people in worse financial shape than myself would never qualify for a mortgage.

Posted by: Ted at October 1, 2009 9:22 PM
Comment #288793

Ted, how are you arriving at those numbers? I don’t see it, but am willing to hear you out.

I assume that that you’re talking exclusively about the portions of large fortunes that consist of share holdings (as other assets, those that are contractually tied up, cannot be liquidated easily or in a hurry, especially during a financial panic).

As a sidebar, I’ll note that if somebody like Gates or Buffett suddenly tried to dump all their stock, there would hardly be a stampede to buy it. Who would want to own Microsoft shares if not even Bill Gates believed in them?

But okay, for the sake of argument, let’s just assume that the big players were willing to take these big hits in order to do what you envision and cash out. Consider what the economy would have to look like already for this to happen, and consider also what they’re going to do with the 60 percent of their orignal net worth that they’re left with Sit on it? Put it in a safe?

Obviously, they’d want to redirect it somewhere else—to whatever sectors of the economy that they believed were healther. Which, quite frankly, is where we’d all want it to go. In such a scenario, the whole series of events would just mirror what was happening in the economy generally as it bottomed out, and whether we’re talking about one or two players or hundreds of thousands, we’d all be marching to the same drummer. Possibly there’s even an advantage here to the concentration of wealth, in that it can be more quickly and decisively redirected to reflect current economic realities and make capital available available where it can do some good instead of where it’s withering on the vine.

Posted by: Paul at October 1, 2009 10:29 PM
Comment #288799

Paul,
I admit that the numbers are pure speculation on my part, I can find no research to back me up or (truth be known my wish is to be proven wrong) discredit my assumption. I base my assumptions on reactions after Bear Stearns. Much to thier credit these people stayed in and road it out. Between that and a large infusion of our dollars the economy was only wounded, not crippled.
My intent was to point out that these same people could actually turn from brakemen to drivers of a downturn if the percieved benefits out-weighed the percieved risks.
As to a rational explanation for such a shift, I don’t have one, only theories wilder than what I have given already. I can only state that the circumstances, instruments, and causes of the current difficulties lack a credible logic and rationality.
(Please forgive my terrible spelling and structure, I am not very good at this.)

Posted by: Ted at October 2, 2009 12:03 AM
Comment #288801

“compare that [wealth distribution] to the portion of the annual tax burdon they also carry”

Ok, lets do that.

“If the federal taxation rate is compared with the wealth distribution rate, the net wealth (not only income but also including real estate, cars, house, stocks, etc) distribution of the United States does almost coincide with the share of income tax - the top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% (wealth 57.2%), top 10% pay 68% (wealth 69.8%), and the bottom 50% pay 3.3% (wealth 2.8%)” (Taxation in the United States, Wikipedia). The proceeding data are from 2001 and do not reflect the disproportionate gains in wealth experienced by the wealthiest in the last eight years.

Posted by: Rich at October 2, 2009 7:41 AM
Comment #288816
blockquote>What if an entrepreneur wants to start a company and needs a loan/financial backing to jumpstart his/her venture? If all the wealth is concentrated in one person, then if that one person isn’t willing to invest; in that case the entrepreneur’s idea never comes to fruition. If the wealth is spread amongst more people, there are more opportunities for people to obtain capital. If person A doesn’t provide support, then perhaps person B will.

That isn’t how it works. Very rarely does an entrepeneur ever pitch an idea directly to any single wealthy individual. If you have the clout to make that happen (to get a personal audience with Warren Buffett, for example) then you’re already playing in the big leagues yourself. How it generally works is that you go to a bank or other financial firm, and the money you’re actually borrowing could be Warren Buffett’s, but it could also be from the retirement plans of middle class workers.

My point is that today, we are fortunate to have a large number of financial institutions available to lend money. That may not be true in the future. If too much wealth accumulates into a very small number of hands, it would give those people too much influence over the future of the economy.

When Warren Buffet invests his money, I’m sure he influences what sorts of projects he is funding (and not funding).

Posted by: Warped Reality at October 2, 2009 1:28 PM
Comment #288937

Jon,

Arguments like these, where you point out how the money of these few people can help so many, are very nice thoughts in theory. It would be so wonderful if we could just get these greedy bastards to give up their boullion to help out the little guy, and if we can’t convince them to do the “right” thing we should just take it by force, right? I mean, they deserve it, being so stinking wealthy while most of us just sit here not starting businesses and working in accounting. In this line of thought, all these people have their trillions of dollars stuffed in a big vault full of gold coins like Scrooge McDuck for no other purpose than gleeful counting, the object of their overly elaborate security device and the occasional bout of coin swimming.

In reality, however, most of their money lies in massive financial institutions, who in turn loan their money out to lesser financial institutions who in turn loan out to larger businesses who loan out to smaller businesses who loan out to smaller fianancial institutions who loan out to small businesses and home buyers etc. Nobody has the right to tell another person they’ve made too much money or own too many things. That was a pretty big idea behind our constitution and the bill of rights. There’s no such thing as too rich, because the excess money of the rich does in fact flow back into the economy. Don’t think I am so naive as to subscribe to trickle down economics though. I feel a fair tax code, that taxes every bracket the same percentage of their income would be the best way to level the playing field. But that’s neither here nor there, the main problem with your argument is that someone somewhere can draw a line in the sand that says this person has too much, lets take the normal taxes out and then take more forcibly away from him and give it to this person who has too little because the other person deserves it more. Even brutal dictators don’t frame it that way to their people when they start “re-appropriating assets.”

Posted by: Doug at October 5, 2009 11:31 AM
Comment #289021

Doug. Rather than tax everyone at the same rate, why not just charge everyone a price that is relative to their wealth? So that a family of four on $20,000 a year paid $1.50 for a loaf of bread, and a single billionaire paid $3.5 million for the same loaf. Then everyone can earn as much as they like, and the world is still fair and balanced!

Posted by: Jonathan Rice at October 7, 2009 9:02 PM
Comment #289034

I get the tongue in your cheek, but you still realize that that means some thrid party is going to be assessing yuor wealth and saying, no you have to much, better start paying more so I can take it from you. I hate to throw buzzwords around, but neither pure communism nor pure capitalism ever works. Pure communism doesn’t work because it defies human nature, and it only takes one brutal but unscrupled person to bring the whole system on its ear and everyone else into his slaves. Pure capitalism doesn’t work because it eventually leads to a feudalistic society, where one person owns everything and everybody else is his slave. You have to temper one with the other, or you’re doomed to fail. If you put caps on how much people can make, or charge people different prices based on income, where is the incentive to do anything other than the most basic and remedial jobs? Without the skilled, the educated and the entrepeneurs, where does that leave your society?

Posted by: Doug at October 8, 2009 8:21 AM
Comment #289048

I find it amusing to watch both the left and the right hold the theoretically extreme positions on this issue of “mega-wealth”. Doug has the ticket in the post above. All people do not hold the same values. Hard work, ingenuity, and wise use of capital should be rewarded. There should be some ‘penalty’ for not producing enough goods or services to feed yourself or your family.

Alternatively, I think it highly immoral to parlay economic success to affect common rules, laws, and regulations which exist to subsidize already wealthy, lock out competition, dampen entrepenuerism, and perpetuate businesses’ economies to the exclusion of others. Government grants rights and privileges to corporations giving them standing in the law. Government can change these laws at it sees fit and by the will of the people. Let capitlism exist holding each player personally accountable and without special protection. Afterall, the everyman is to be held accountable for his own action/inaction according the capitalists. There is no immutable right of any entity to continue business as usual in perpetuity. Ask the Native Americans how this works. Ask citizens who have been run off their own property via ‘imminent domain’. These generally are not the wealthy!

Money is a concept that we have agreed to honor. Resources are the real wealth. When people talk about the ‘money’ held by the wealthy, they often do not think of what that ‘money’ is. Oil, land, buildings, manufacturing plants, timber, mines, etc. These are to be granted to a few alone? Let them eat cake!

When in doubt… follow the money. I know the mantra on the right is that the left is ‘tax and spend’. But all one has to do is to see where the money that the government spends is going. Hint folks: it aint to the poor. (Hence, the recent Republican administration’s reluctance to quit spending!)

These things have a way of working out… often very unpleasantly if a sense of fairness and decency are not exercised by the ultrawealthy. See Chinese Communist Revolution, Bolshevik Revolution in Russia, and a myriad of third world nations.

Surely both sides have a good point, but either taken to extreme is not only wrong… it’s playing with fire.

A few random and not entirely put together thoughts, anyway.

Posted by: LibRick at October 8, 2009 10:18 PM
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