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http://www.nytimes.com/2012/07/13/opinion/krugman-whos-very-important.html
“Is there a V.I.P. entrance? We are V.I.P.” That remark, by a donor waiting to get in to one of Mitt Romney’s recent fund-raisers in the Hamptons, pretty much sums up the attitude of America’s wealthy elite. Mr. Romney’s base — never mind the top 1 percent, we’re talking about the top 0.01 percent or higher — is composed of very self-important people.
Specifically, these are people who believe that they are, as another Romney donor put it,
“the engine of the economy”; they should be cherished, and the taxes
they pay, which are already at an 80-year low, should be cut even
further. Unfortunately, said yet another donor, the “common person” —
for example, the “nails ladies” — just doesn’t get it.
O.K., it’s easy to mock these people, but the joke’s really on us. For
the “we are V.I.P.” crowd has fully captured the modern Republican
Party, to such an extent that leading Republicans consider Mr. Romney’s
apparent use of multimillion-dollar offshore accounts to dodge federal
taxes not just acceptable but praiseworthy: “It’s really American to
avoid paying taxes, legally,” declared Senator Lindsey Graham,
Republican of South Carolina. And there is, of course, a good chance
that Republicans will control both Congress and the White House next
year.
If that happens, we’ll see a sharp turn toward economic policies based
on the proposition that we need to be especially solicitous toward the
superrich — I’m sorry, I mean the “job creators.” So it’s important to
understand why that’s wrong.
The first thing you need to know is that America wasn’t always like
this. When John F. Kennedy was elected president, the top 0.01 percent
was only about a quarter as rich compared with the typical family as it
is now — and members of that class paid much higher taxes than they do
today. Yet somehow we managed to have a dynamic, innovative economy that
was the envy of the world. The superrich may imagine that their wealth
makes the world go round, but history says otherwise.
To this historical observation we should add another note: quite a few
of today’s superrich, Mr. Romney included, make or made their money in
the financial sector, buying and selling assets rather than building
businesses in the old-fashioned sense. Indeed, the soaring share of the
wealthy in national income went hand in hand with the explosive growth
of Wall Street.
Not long ago, we were told that all this wheeling and dealing was good
for everyone, that it was making the economy both more efficient and
more stable. Instead, it turned out that modern finance was laying the
foundation for a severe economic crisis whose fallout continues to
afflict millions of Americans, and that taxpayers had to bail out many
of those supposedly brilliant bankers to prevent an even worse crisis.
So at least some members of the top 0.01 percent are best viewed as job
destroyers rather than job creators.
Did I mention that those bailed-out bankers are now overwhelmingly
backing Mr. Romney, who promises to reverse the mild financial reforms
introduced after the crisis?
To be sure, many and probably most of the rich do, in fact, contribute
positively to the economy. However, they also receive large monetary
rewards. Yet somehow $20 million-plus in annual income isn’t enough.
They want to be revered, too, and given special treatment in the form of
low taxes. And that is more than they deserve. After all, the “common
person” also makes a positive contribution to the economy. Why single
out the rich for extra praise and perks?
What about the argument that we must keep taxes on the rich low lest we
remove their incentive to create wealth? The answer is that we have a lot of historical evidence,
going all the way back to the 1920s, on the effects of tax increases on
the rich, and none of it supports the view that the kinds of tax-rate
changes for the rich currently on the table — President Obama’s proposal
for a modest rise, Mr. Romney’s call for further cuts — would have any
major effect on incentives. Remember when all the usual suspects claimed
that the economy would crash when Bill Clinton raised taxes in 1993?
Furthermore, if you’re really concerned about the incentive effects of
public policy, you should be focused not on the rich but on workers
making $20,000 to $30,000 a year, who are often penalized for any gain
in income because they end up losing means-tested benefits like Medicaid
and food stamps. I’ll have more to say about that in another column. By
the way, in 2010, the average annual wage of manicurists — “nails
ladies,” in Romney-donor speak — was $21,760.
So, are the very rich V.I.P.? No, they aren’t — at least no more so than
other working Americans. And the “common person” will be hurt, not
helped, if we end up with government of the 0.01 percent, by the 0.01
percent, for the 0.01 percent.
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