Only Taxing the Rich is Bad, Says O'Driscoll

The Yahoo! Finance web series the Daily Ticker today consisted of an interview with Gerald O’Driscoll, former Vice President and economic advisor at the Dallas Federal Reserve, and a senior fellow at Cato Institute. He was asked whether there was anything that either the Fed or Washington could do to spur job creation, and naturally O’Driscoll quickly turned to criticizing President Obama’s tax policies, describing the raising of marginal tax rates on millionaires and billionaires as economically destructive.

The interviewer reminded O’Driscoll of the counter-arguments that would come from the presidential administration and its supporters, then asked: “Do you make a distinction between taxes whether they’re aimed at individuals or corporations, or is it – bottom line – raising taxes on anybody is bad for the economy?”

I think that question presented O’Driscoll with a pretty clear choice: is the problem simply taxation in general within a weak economy, or is it taxation of businesses? Yet O’Driscoll appears to have avoided that simple choice and opted to advance an entirely different perspective.

He began, “Well I would say that raising taxes on the…” and then paused at length, searching for the right synonym for “wealthiest Americans.” I found that pause very telling. He knew about whom he was talking, but he needed to phrase it in a way that served his ends. Using the phrase “the rich” is perfectly clear to every viewer, but using the phrase “the source of savings and investment” obfuscates what we’re talking about and makes it harder to attach an image to the subject, but easier to affix it to a concept. So that was the phrase that O’Driscoll settled on, saying that raising taxes on the source of savings and investment is bad for the economy.

Now, did you notice how that avoids the simple one-or-the-other choice that he was given with the question? For simplicity, let’s drop the more pleasant synonym and just acknowledge that he’s talking about the rich. So when he’s asked whether it’s bad, in a weak economy, to raise taxes full-stop, O’Driscoll’s answer is really no, it’s bad to raise taxes on the rich in particular. Theoretically, his point of view leaves open the possibility of raising taxes on the poorest American’s without expectation of consequence. Of course, this is something that several Republicans have actually advocated, but it’s quite amazing to see that such callous initiatives have a theoretical underpinning.

O’Driscoll continues by rebuking the president for ostensibly failing to understand that most business are not C Corporations and thus are not taxed separately from their owners, “So when you raise taxes on individuals, you’re raising taxes on the business, and hence… you’re inhibiting job creation.”

I almost admire how the language of this quotation allows O’Driscoll to exclusively designate millionaire business owners as “individuals.” Raising taxes on lower or middle class workers doesn’t raise taxes on business. Even raising taxes on millionaires who primarily earn their income from things like investments in businesses they don’t own is not equivalent to raising taxes on businesses. Do neither of these groups count towards the discussion? That seems suspiciously convenient for O’Driscoll’s argument.

Essentially, that argument seems to be that it’s destructive to raise taxes on extremely wealthy individuals, because they might use some of their own wealth to invest in the businesses they own or from which they profit. Meanwhile, by this line of thinking, there is no particular problem with raising taxes on people who will definitely use a portion of their slight income to purchase things like food, clothing, and gas.

I admit that my understanding of economics is rather rudimentary, but it seems to me that a sure-fire way to create jobs is by raising demands for goods and services, thus increasing the size of the workforce required to supply that demand. Unless I’m wrong about that, it’s pretty asinine to suggest that allowing the wealthy to hoard their money while thinking nothing of depriving the poor of theirs is the best way to stimulate the economy. Sure, business owners need personal wealth to invest in their industries. But why on Earth would they do so if demand for what they’re offering remains flat.

By contrast, if a wealthy American is legitimately interested in earning the highest margins from his business, he would be a fool not to make investments to match growing demand, unless of course his wealth has been taxed out of existence. But I hardly think anybody’s proposing that, and I certainly don’t think that paying a thirty-five percent marginal rate would cripple a billionaire’s investment capabilities.

Please Stop Working for Free

I was pleased to see that Stephen Colbert levied brilliant criticisms against CNN’s iReport social network on his Monday night show:

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It’s wonderful to see a satirist or critic taking on the topic, but it’s important to keep in mind that CNN is far from being the only organization to uncompensated labor from the public, at the expense of actual jobs. If CNN is the worst offender, it is only by virtue of its being an exceptionally large and visible organization. But some content on the front pages of Yahoo! is drawn from its amateur contributor network. And while it does allow people to earn nominal payments based on page views, ultimately Yahoo! is relying on a large pool of writers and photographers who are willing to work for free and consider any compensation whatsoever to essentially be a gift. AOL and the Huffington Post utilize the same model, and of course the latter is also infamous for simply reposting paid content from other news sources. On top of that, there are various sites whose sole concept is to gather creative content from as many people as possible and then present some sort of prize to those that pay dividends on nothing. And each of them seemingly finds a steady supply of willing participants.

That willingness seems unlikely to become the focus of other critics, but I think it is the main issue here. So long as news outlets remain primarily concerned with making money, it is only natural that they will latch onto business practices that allow them to maintain output without the need to pay formerly requisite salaries. Quality be damned, if it brings them any revenue, it is worthwhile because it contributes nothing to overhead. There’s even a business term for this kind of acquisition of labor: crowdsourcing. It serves much the same purpose as outsourcing work to foreign countries, but is even better for the business, as outsourcing exploits the necessity of workers accepting appalling low wages because of their local conditions, whereas crowdsourcing exploits the willingness of workers to accept no payment at all because of their imagination of some future reward.

Certainly, I would be thrilled if there came a breaking point for the news media, and they came to realize that they have an obligation greater than the acquisition of capital. Each person can play a role in promoting that realization, primarily through his choice of what media to consume, but ultimately that breaking point is up to the executives of several corporations, and out of our hands. What ordinary people should realize instead is that they are enabling this sort of exploitation, and contributing to the rampant decay in the quality of news and popular culture. There is a breaking point that every writer and artist must reach, whereby we come to understand that we are being used, and that we are allowing ourselves to be used.

There’s really nothing in it for us if we keep giving away work for free. I’m sure that many people provide content for major websites purely in pursuit of fifteen minutes of fame, but I expect that many people also do so on the assumption that it will lead to some discovery of their brilliance, that the exposure to a wide audience of CNN viewers or Yahoo! readers will open doors for them. What they ought to understand, though, is that that pursuit of self-interest will ultimately prevent those doors from opening to anywhere. Every decent writer who offers free content in hope of future opportunities is evidently expecting someone to come along and pay for what everyone else is getting for free.

Of course, if the decent writers and artists realize this and drop out of the crowdsource, I suppose that would just leave behind the terrible writers and artists, and raise the question, would CNN, Yahoo!, AOL and the like continue to drink from a tepid pool? They might. But the subsequently accelerating deterioration of quality just illustrates the way breaking points work. If we keep quality content out of the hands of those who would exploit it for free, won’t there come a point at which the dreck they’re channeling into public view just isn’t worth looking at anymore? There simply must be a lower limit to what we’re willing to accept and popularize. There must be, even though there is apparently no lower limit to what many people are willing to accept as compensation for their creative efforts.

Cash Only

The front page of Yahoo! grabbed my attention with a story titled “10 Reasons I’m Cancelling My Credit Cards,” a story which I was uncommonly thrilled to see. It’s not often that a piece featured on Yahoo! makes me applaud the author, especially when it is drawn from the personal finance section, but this is rare example of meaningful, forward-thinking advice being offered in a mainstream outlet, despite being against the so-called common wisdom.

Sign of the Times

Apparently, there is a hot new trend among large law firms, to create a separate career track for newly hired attorneys whereby they do the same work as others, but are paid less than half the salary, usually bringing in somewhere between fifty and sixty-five thousand dollars annually. Could there be any clearer warning about the rapidly advancing death of the American middle class? If you graduated from law school ten years ago and secured employment at a high-level firm, you stood to easily make six figures. If you’re just graduating now, you absorb a greater debt burden, but your earning potential is drastically reduced as a matter of policy.

Just Ignore the Roof Over Her Head

Despite clocking in at over two thousand words, this post is going to be shorter than it should be. It is, however, also longer than it should be in the sense that it shouldn’t exist at all. Not where I am posting it. You see, I’ve been trying to build a personal brand for myself and run a successful copywriting business, and I have honestly taken up the advice of the douche-bag real estate agent in American Beauty: “In order to be successful, you must project an image of success at all times.” I use this blog to advertise myself to prospective clients, and so I try to keep it free of mentions of my economic hardship, or any personally negative feelings that aren’t expressly directed at current events or social trends. (I should probably also aspire to keep it free of usage of phrases like “douche-bag.")