Income Inequality, the Koch bros, WWJD…

This morning I was asked in reaction to a FB post re: class warfare, a bunch of questions – about crony capitalism, the Koch bros, inequality, WWJD, etc. My response was rather long (had to be broken into parts for FB comments). Thinking about it, I decided to post it on its own, here, FWIW.

I figure it’ll annoy some of you, entertain others, and not be read in its entirely by some. I’d be happy to have your thoughts – I prefer never to stop learning.

Thanks!

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Love to answer your questions. And since I’m spending a lot of time doing so, I’d appreciate the courtesy of reading the response in its entirety, even if you find areas of disagreement. And if you disagree and can present a logical, reasoned argument, I’m always up for learning something new.

I agree that corporate welfare is a ridiculous, and ridiculously large, expense, and not one the government of a free society ought to be undertaking. No argument. And that includes Green energy capital cronyism, like Solyndra & Fisker.

Any discussion of “most profitable” companies that includes the oil companies is incorrect. Profitability is measured by Earnings Per Share. Exxon (2013 EPS = $7.37) has far lower EPS than Apple (2013 EPS = $39.75), Google (2013 EPS = $9.56) or nearly all other companies. Drilling oil is capital intensive, i.e. requires lots of capital, which mean lots of shares. Because so many shares are outstanding, the total profits of a few bucks/share seem quite large – but oil is not nearly as profitable (return on investment) as are tech stocks. And, if EPS were even lower, no one would invest and no oil would be drilled by American companies – under the strictest environmental protections on the planet, leaving even MORE drilling to be done overseas under NO environmental regulations. (The more we push oil drilling overseas, the dirtier a planet we create.)

The positive side of Big Oil profits for government is that oil companies also pay huge amounts of corporate taxes. In 2008 I blogged that the three largest American oil companies paid $47.8B in taxes. If you don’t want these companies to be profitable, you are arguing that you can replace that tax base with another that will not damage the economy. Good luck with that. (My blog post was in re: electric cars; if we had electric cars, and decreased our oil by a large percentage, how would that tax revenue be replaced?)

Regarding tax assistance to oil companies, there is a tax break for every company that depletes inventory / burns through raw materials, the purpose of which is to encourage manufacturing. Mining and oil extraction deplete their inventory of raw materials as they drill. In order to eliminate this tax break (which would cause lower profitability and less tax revenue, btw), you’d have to remove it for everyone. No more breaks as you deplete inventory, lower profits, lower tax revenues. For ALL manufacturers, not just Oil & Gas. This would cause more manufacturing jobs to go overseas, reducing jobs and lowering overall tax revenues. But there also is a severance tax in 37 states taxing the withdrawal of natural resources – like oil.

If you’re OK with reducing those revenues, either you spend less (the Left will complain), tax more (harm the economy), or run up more debt (destroying future living standards and destroying jobs today).

Let’s look at that last a second because almost no one discusses it. The cost of creating a job in America is about $90K. The Debt servicing cost of the US Debt in 2013 was $415,688,781,248, or $1,889,494,460 per workday (220/yr). Do the math. The servicing of the Debt in 2013 meant that 20,994 jobs PER DAY were not created.

A larger debt is not just some amorphous future un-payable number. It is destroying job creation TODAY.

The Koch brothers. First off, are you aware they are one of the largest funders of PBS? That’s not exactly right wing extremism. Second, given that their industries create jobs and huge pools of tax revenue (corporate and income), are you saying they ought to be demonized and put out of business? Why? Due to ideology? Are you willing to put out of business others who happen to have an ideology with which you agree? Who gets to decide – you? Me? Bert down the street? Why and on what rational basis? If you put them out of work, where are the tens of thousands of jobless you create going to work? How will you replace the corporate and income tax revenues? How about Soros? Soros got rich shorting the British Pound Sterling, impoverishing – literally – millions of Brit Seniors. Did you know that? If we are going to put out of business the Kochs, are we going to put out of business Soros? What objective basis would allow either to occur in a free country? What logical argument do you entertain to terminate someone’s ability to pursue their happiness because they have a different worldview than you?

Regarding heritable wealth, the Kochs leaving behind billions. So? They earned it, why should they NOT be allowed to leave it to their heirs? It’s THEIR money. Did the poor people earn it? No. So they have what logical call on that money? None.

But I agree completely that heritable wealth is a huge, unaddressed issue. It also is the single largest issue in the inner city – the lack of it is the primary driver of intergenerational poverty among African Americans. Can this be fixed? Sure. Easily? Yes.

Look at Social Security. It is enormously regressive, and it is grossly mismanaged. One of the major problems with SS is demographics. Blacks enter the workforce sooner than whites and die younger. Facts. So they spend their entire working lives paying for a check to Warren Buffet who, because he is over 65, and because we (absurdly) do not means-test SS, gets a check. And then they die (at 62) before they get back one nickel – – and it is NOT heritable; NOTHING goes to their kids. Now consider privatizing SS. ALL the money you pay-in, comes back. And, if you die, it goes to your heirs. It also must be understood that SS never was, is not, and never will be a pension system; it’s a financial tool to keep granny out of the cat food. The money I and my company put in this week goes out next week to a senior (whether or not they need it). And I only get money out of it if there are enough kids paying INTO it when I retire. Have you checked American demographics lately? The ONLY Blue States having fertility above replacement are HI, NV and NM. Democrats refuse to privatize SS, but are not having the kids to pay for it. (This is an even worse problem across the entire West than in America and is the primary driver behind the fiscal crises in Europe.)

(SS can be fixed in ten years, BTW: means test the payout to some multiple of the poverty line – if you’re above that multiple you don’t need or get a check; and end the earnings cap that makes it so regressive. Those of us above the cap spend way more on political campaigns than those below the cap – it’s OUR fault these idiots in Congress have so overspent the Trust Fund (which really WAS a trust fund until the 1968 (D) Congress voted to put it all into the General Fund so they could (over)spend it, btw.))

Re: poverty. It is not the fault of the Kochs that people in America are poor. It is not the fault of the Middle Class, either. Poverty in America is behavioral. We have spent, since the beginning of the Great Society, over $17T in anti-poverty programs and have not reduced the rate of poverty even 0.1%. Anti-poverty programs DO NOT WORK. Sen. DP Moynihan (D-NY) pointed this out at the beginning of the Great Society, and wrote about the enormous damage to Blacks those programs would cause. For this – which has turned out to be worse than even he imagined – he was ostracized by his own Party.

WWJD? This is a question I don’t spend a lot of time on. Are you familiar with Mark 12:17? This is a nation of laws, not a theocracy; and Jesus said give to the law what is the law – AND it was the first clause in that sentence, NOT the second. And unless you are willing to give away all of your possessions, and simultaneously pretend that doing so will do other than feed a man for a day, then the answer to poverty is to teach him to fish, NOT to give him fish. WWJD? Tell him to fish. THAT is WJWD. The entire WWJD argument re: poverty turns scripture on its head, saying we should give people a fish – instead of a job. It’s an absurd mis-reading and misunderstanding of the Bible.

But your unstated point that the inequality of wealth is not right – I completely agree. But you also should note that income inequality ALWAYS increases during Democrat administrations and DECREASES during GOP administrations – Progressive economic policies are bad – and WORSE for the poor. Two ways exist to combat this – one the Left hates and one the Right hates, interestingly enough.

1. The Left would hate: End Welfare other than a food bank at City Hall. Poverty is behavioral. If you graduate HS and get a job before you get married and get married before you have kids, you will NOT be in poverty in America. Fact. So stop welfare to anyone not meeting those criteria. I’m happy to give a hand to those who have TRIED to better themselves and failed; I am NOT happy to lower my – earned – living standard to help those who have not even tried. America did not become the leader of the Free World or the wealthiest nation in the history of the known universe on handouts and welfare. If you couldn’t find a job, you went where you could. Check the mass migrations of married men during the Depression, how many men left their families to find a job to send back the money they could not make at home. Pretending a nation can be successful by paying people not to work is ahistorical. It has NEVER worked.

2. The Right would hate: When I got into the labor force after college, I went to work for IBM. It was a $40B company, and the CEO made $1M. Before Baby Boomers (my generation), CEOs would have been ashamed to make the huge salaries they are making now. No conservative value is supported by a CEO making tens of millions of dollars while janitors in that company can barely get by and cannot send their kids to college. At the same time I am NOT in favor of government meddling in the salary marketplace directly. So create a system in which a company can pay their executives any amount they want – but if it’s more than 100X the lowest earner, tax the overage at confiscatory rates. If you’re going to pay your CEO $10M, fine. Then you pay your lowest-paid janitor $100,000. Since shame won’t work on Boomers, maybe taxes – that SUPPORT the American Dream by returning more to workers – will. (I’ve blogged this in more detail here.)

The above commentary is fact-based and logic-based. You may not agree with some or all of it, but unless you can refute it with facts, history and logic, no reason exists for anyone to listen. The fiscal problems in America will not be fixed with fantasy.

About Alex Scipio

About Alex Scipio: Alex moved out of the People's Republic of California to the Free State of Arizona, finally tiring of the lack of the Bill of Rights, the overgrown idiocracy, and the catering to non-Americans & welfare recipients. He still wonders how America got from Truman, Eisenhower, and Daniel Patrick Moynihan to the Liberal and Conservative extremes so badly managing America today. And, yes, islam DOES need to be annihilated. And doing what he can to get folks away from the extremes of political life.
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2 Responses to Income Inequality, the Koch bros, WWJD…

  1. Fred Kramer says:

    WWJD: I certainly enjoyed reading your concise and clearly stated, ‘religiously neutral’ argument.
    I envy your education.

  2. Arch Hughes says:

    WWJD: I think that anyone who argues from this position can’t be making a serious argument. Perhaps it is a way to claim the moral high ground in an argument. But I can’t imagine how it is anything but an emotional argument. Would Jesus feed the poor? Would he overturn lending tables? Would he turn the other cheek? Would he work as a carpenter? Would he marry and have a family? I suspect that you can find almost any position supported in the New Testament. (Not that I intend to denigrate the Word. I have a great deal of respect for It.)

    Kock Brothers: Another red herring repeated by people that believe the words of Harry Reid. There are far greater problem in this country, and many people will fewer smarts to be attempting to direct this country. It’s another “war on women” expression repeated by those who would rather do harm to those they disagree with than politely and respectfully discuss issues. (The war on women happens every day…in Sharia-based legal systems.)

    Another major economic area (not discussed above) is the school debt crisis. Government intervention into what should be a free market has pilled up trillions in debt that is unlikely to be repaid, and that intervention has driven up the cost of education by delaying the perceived economic consequences of bad financial planning on the part of those who should be smart enough to know better. For example, is a BA in History worth $80K in debt, either to the individual or to our country? Is a BS in engineering worth that same $80K in debt? Which is more likely to be paid back within 6 years of graduation?

    Poor: There is a lot of confusion lately about “poor” and “opportunity”. I grew up poor. My dad worked his ass off for little money. I paid my way through college via an ROTC scholarship and jobs during school. No one I knew got a free ride from their parents or the government. Everyone had the same opportunity. (Those 40 years ago racial discrimination was more of a problem for blacks, for sure. But (according to Lou Alcinder, there is less racism now in the US than there are ghosts) those impacts are far less today than 40 years ago. Everyone has a chance to get an education, get a job, etc. Opportunity abounds. People just have to get off their butts and make good choices.

    Time for dinner. TTFN.

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