–Income inequality: The Stilgitz, Roubini, Buffett Solution.
Rodger Malcolm Mitchell
Feb 18 2013
If I told you world hunger is a serious problem, would your first thought be:
We should cut food rations to the people, who already are amply nourished, to “even things out”?
If I told you air pollution is a terrible problem in Beijing, China, would you suggest that China pollute other cities, to “even things out”?
If I told you deforestation is a serious problem in Brazil, would you suggest that the solution is to deforest Canada, to “even things out”?
If I told you that polio remains a problem in parts of India, would you suggest we introduce polio to other parts of India, to “even things out”?
Then you don’t think like Nobel Prize winner Joseph Stilgitz, New York University professor of economics Nouriel Roubini or Warren Buffett.
Consider these excerpts from an article in policymic.com:
Income Inequality in America: What We Should Be Doing About It:
Recent studies are finding that inequality is not just a matter of ethics or justice, but a serious economic issue contributing to many of America’s current financial problems. Inequality makes an economy inefficient and unstable, and limits the opportunities and mobility of its citizens.
New research is challenging economists’ traditional view that inequality is a necessary evil for an efficient capitalist society. Nobel Prize winner Joseph E Stiglitz leads the charge in his 2012 book The Price of Inequality, concluding that unequal societies are inefficient and tend to have unstable, unsustainable economies.
Absolutely true. Preaching to the choir, here. But continue reading.
A 2011 International Monetary Fund study agrees and adds that inequality tends to cause economic volatility. Stiglitz further argues, echoing a point raised by economist Christopher Brown of Arkansas State University, that income inequality hinders consumption spending and therefore causes “a shortfall in aggregate demand.”
What can we do about it?
Good conclusion and good question. Here is their answer:
Joseph Stilgitz and New York University professor of economics Nouriel Roubini, among others, agree that higher taxes, particularly for the upper-middle class and up, will help "even things out," thereby “unlocking the U.S. economy’s growth potential in a sustainable way.”
“Even things out”? That’s the solution? And how will increasing taxes on anyone increase aggregate demand? Answer: It can’t. Reducing the money supply reduces aggregate demand.
Here’s a bit more nonsense from our renowned economists and capitalist:
They, along with billionaire Warren Buffett, additionally agree that the government should limit the tax breaks, subsidies, and loopholes allowed to the major energy, agri-business, pharmaceutical, and financial companies.
Yes, in this world market, we should do everything possible to hamstring American corporations. Energy research and development is unnecessary, as is pharmaceutical research and development. Right??
In Roubini’s words, the government should make sure, “corporations and individuals whose income is derived from investments pay taxes commensurate with the benefits they get from the US citizenship.”
Not only is this silly from a practical sense (How would “the benefits” be measured to make taxes “commensurate”?), but it is absurd from an economic sense. Taking more dollars out of an economy, depresses the economy. Period.
Learn Monetary Sovereignty, renowned professors.
The federal government (unlike state and local governments) does not spend tax dollars.
Because the federal government has no need for, nor use of, tax dollars, taxes do nothing but impoverish the economy.
Raise taxes on corporations, and what will the corporations do?
1. Fire workers or cut salaries
2. Spend less
Both of those results will impoverish our economy, especially the lower and middle-income classes.
Raise tax rates on the uber-rich, and what will they do?
1. Invest less
2. Buy less
3. Fire people who work for them.
All of those results also would impoverish our economy, especially the lower and middle-income classes — except for one thing:
While the upper middle-class will get stuck and see their incomes reduced, the super-rich probably won’t pay the taxes anyway.
Isn’t that what Romney’s offshore accounts are for?
You can be sure the upper .1% will pay the politicians for exemptions and exceptions.
Yes, people love to see those with more money get their comeuppance, but this would be a classic cut-nose-to-spite-face act.
Surely, Stiglitz, Roubini and Buffett (oh, my!) know this stuff. It’s as basic as economics can get. So what are their real motives for making such silly suggestions?
As I often have said, the super-rich do not care about absolute income.
They care about comparative income.
They care about widening the gap.
And what is the best way to widen the gap?
Increase taxes to impoverish the entire economy, so that even the middle class faces starvation.
The economists’ more charitable motive is this: When they win Nobels and are lauded in the upper-.1%-owned media, they like to please and hang with the rich. No one ever was fired, lost tenure or ignored by rich-owned media for laughing at the boss’s jokes.
That’s the more charitable motive.
Rodger Malcolm Mitchell
Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports