Mr. Sterling – Tonight on NBC at 8 January 31, 2003March 25, 2012 My only regret is that I didn’t know to suggest this in time for you to see the first three episodes. But you’ll quickly catch on. It is to the Legislative Branch what the West Wing is to the Executive. Tonight on NBC at 8pm. Donald Millinger: ‘While you may be heartened by Bush’s commitment to increase spending by $2 billion a year to combat AIDS in Africa (let’s wait and see if that’s fully funded), and it is indeed a great promise, it only makes me angrier about his domestic behavior on the issue. By forcing his ‘abstinence only’ policies, opposing needle exchanges, failing to encourage schools to provide accurate and complete prevention education and eliminating effective information on government websites, he is reducing prevention efforts here at home and increasing the likelihood of more infections. As evidenced by Jesse Helms as he was leaving the Senate, it is easier for Bush to ‘sell’ AIDS in Africa to his party than confront it as a domestic issue, since it is still perceived by many conservatives as a gay disease in the United States.’
Where Would We Be Without Molly? January 30, 2003February 22, 2017 THE PITTS Click here. Enjoy. (Where would we be without great Texas women like Ann Richards, Liz Smith, Marie Brenner, and – as per this latest column – Molly Ivins?) AH, THE BIBLE CLUB And here. This one’s not about your money, as Molly’s is. It’s about teaching kids in Kentucky to hate. (Where would we be without the New York Times?)
The State of the Chicken January 29, 2003February 22, 2017 Jim: ‘I say my tax-deferred interest income is not like money coming into my budget; my wife says it is part of my income. We don’t receive it as cash; it compounds. Should this be included as part of my income to budget with?’ ☞ I prefer your approach because it’s more conservative. Ideally, your investments would occupy a separate place in your brain for growing, not spending – augmented each year by the surplus from your budget – until the time come to buy a house or pay for college or, eventually, supplement Social Security during your retirement. I goofed with the link to Gary Halbert’s letter yesterday. It’s fixed. My wide-eyed optimism was obviously misplaced a couple of weeks ago when I hazarded that Amram Mitzna would replace Ariel Sharon in yesterday’s election. It was presented more as a wishful hunch than a prediction (what do I know from Israeli politics?), but either way, I was not even close. I have so many thoughts on the State of the Union (the least of them being that it’s pronounced NOO-klee-er) that I’m not even going to try. Suffice it to say that on the Iraq part – especially if Russia comes around, as seems to be happening – I think the administration may have it about right, awful as the situation is. (Well, about right other than that the timing of the war debate was incredibly cynical, and the approach should have been multilateral from the start.) I don’t think we should proceed unless we can persuade a lot of our friends that it is the right thing to do. But I think we will persuade them. And who knows – maybe Russia will be able to persuade Saddam that the jig is up. I was heartened by the additional $2 billion a year to combat AIDS in Africa and by the boost for hydrogen-powered cars. I don’t know enough about the latter to know how real it is, but it does at least seem more hopeful than the original Bush push to cut the budget for alternative energy research in half. The colossally misguided tax proposals? The Social Security proposal? The prescription drug plan? Well, it’s a great time to be rich and powerful in America. But I don’t think that going into debt in order to lop $327,000 off Dick Cheney’s tax bill is going to produce jobs. Finally, you may recall my November 14 column about cruelty to animals (I was for it!), titled, I Don’t Want to See the Factory – Please Pass the Salt. Now from my friend Dan Mathews at PETA, who once dressed up as a carrot to protest something – it wasn’t cruelty to carrots, I remember that much – was it cruelty to rabbits? I think that may have been it – now comes this e-mail. I was contrasting various compensation levels (you knit, you play tennis, I contrast compensation levels), and I thought to compare the pay of Tyson chicken chief John Tyson, who made $7.3 million plus options and perks last year, with the pay of PETA President Ingrid Newkirk, who made $26,000. I e-mailed Dan just to make sure I remembered correctly that PETA was down on Tyson. This is not to say Tyson is wrong and PETA is right – the more efficiently Tyson can produce chicken, the less it costs consumers – but read Dan’s response and you decide. Do Not Read This Before Lunch: Tyson is among the key culprits in making sure birds are exempt from the Humane Slaughter Act. As one of the world’s largest poultry producers, Tyson confines billions of chickens to filthy, poorly ventilated sheds where they spend their entire lives living in their own waste. To increase profits, they genetically manipulate birds to grow so large, so fast that their legs cannot withstand their own weight, leading to deformities, chronic leg pain, crippling arthritis and an inability to get to food and water. Overcrowding is so severe that suffocation, heart attacks from stress, and disease transmittal are all too common while it is often impossible for the birds to make even the most basic movements, such as spreading their wings. During transport, birds are crammed into cages on trucks for hours without food or water and many are trampled to death by their frightened cage-mates. At the slaughterhouse, they are dropped fully conscious into boiling water to defeather them. Hungry yet? Coming: I Still Owe You Dissenting Views on the Copyright Issue
Nineteen Percent of Us Are in the Top One Percent January 28, 2003February 22, 2017 [Sorry if you had trouble reaching yesterday’s column – and for its length, if you did reach it. It was the Internet worm.] MOVE OVER, LAKE WOBEGON! Paul Lerman: ‘In regard to your wonderment at . . . ‘the Republicans’ skill at persuading so many folks, who don’t earn $300,000 or $3 million, that huge tax cuts for the best off are something we should go deeply into debt to provide’ . . . a Time Magazine survey referenced by David Brooks in the New York Times (‘The Triumph of Hope Over Self-Interest’ – January 12) may help to explain it. The survey asked people if they are in the top 1 percent of earners. Nineteen percent said they were. A further 20 percent said they expected to be someday. ‘So right away,’ notes Brooks, ‘you have 39 percent of Americans who thought that when Mr. Gore savaged a plan that favored the top 1 percent, he was taking a direct shot at them.” [Not only are all the inhabitants of Lake Wobegon above average – they are way, way above average.] BORROW-AND-SPEND REPUBLICANS James: ‘You ask . . . ‘How much deeper into debt do the borrow-and-spend Republicans have to bury us before that moniker – ‘borrow-and-spend Republicans’ – finally catches on? Another $3 trillion? Another $6 trillion?’ . . . Your partisanship is showing. You know it is a fact that we have not had a year-over-year reduction of national debt since the 1950’s. Both parties have been on a spending binge for the last 50 years.’ ☞ The national debt went up far more as a percentage of GDP under Reagan/Bush and will now again under this Bush than it did under Carter or Clinton. Yet all we ever hear is ‘tax-and-spend’ liberals. The Republicans seem to spend as much as the Democrats; they just don’t want to pay for it. They push it off onto our kids to pay instead. My point is simply: the term ‘borrow-and-spend Republicans’ is probably just as valid as ‘tax-and-spend liberals.’ But we don’t have a Rush Limbaugh brainwashing 17 million cheerful ‘ditto-heads’ a day, so you have to spread the word. GARY HALBERT NEVER MET A MAN WHO MADE MORE THAN $200,000 Walt Klypchak: ‘The attached letter seems to be an objective, fact-based review. Is it?’ ☞ Well, it’s interesting, the more so because the author, Gary Halbert, says it reaches to 1.6 million people. The part I find most worth reading describes how the dividend-tax-cut proposal, if it ever passed, would lower the capital gains tax as well. (And complicate taxes even more.) So that part is worth reading. But then, at great length, Halbert sneers at those of us who fault the Republicans for favoring the rich. Take this one little snippet near the end. He writes: And Finally, Who Are ‘The Rich’ Anyway? If you make $28,000 a year, you are in the top 50% of taxpayers; $55,000 puts you in the top 25%; and $92,000 puts you in the top 10%, the so-called “super-rich.” The liberals NEVER quote these figures either. They know that most people making $28,000-$55,000 do NOT consider themselves remotely to be rich, nor do many who make $92,000. These folks would be appalled if the liberals were to call them rich people, so they don’t. And why would we? Who ever said that someone in the top 10% was ‘super-rich?’ I have never heard anyone say that. Have you? No place in Halbert’s letter does he ever mention anyone earning more than $200,000. He admits those folks would save $3,000 compared to what would be saved by people earning less, but, heck, they paid so much more to begin with – all of which I don’t much dispute. But that’s not what most people are objecting to! That’s not the famous ‘top 1%.’ No place does Halbert mention what someone in the top 1% would save. Not President Bush, who it’s been estimated would save $44,000 a year from his tax cut. Not the VP, who it’s been estimated would save $327,000. And even they are not ‘super-rich,’ by the way, if you ask me. They are three hundred million miles from the Forbes 400. If Halbert is trying to be objective – and not just trying to seem objective – why is he casting this as a dispute between average folks and those who make $200,000 a year? The top federal income tax bracket doesn’t even kick in until you get to $307,000 in taxable income (which can mean a lot more than $307,000 in total income) – so why was $200,000 the highest income he could imagine mentioning in his discussion? Halbert is obviously a bright man. My guess is that he earns far more than $200,000 a year himself. It strikes me that sending his message out to 1.6 million readers, most of whom probably earn less, is purposely deceptive. I wonder how much the tax cuts would save him? I wonder, for that matter, how much the tax cuts will save Rush, and whether he’s told all his ditto heads – 19% of whom are in the top 1% and 20% more (God bless ’em!) expect to be.
More Thoughts About the 10 Men and the $100 Dinner January 27, 2003February 22, 2017 Dan Marcucci: ‘Thanks for that idiotic thing about ten men going to dinner. It is truly idiotic. The part of the story that really grates is the premise that all ten men are eating the same dinner. In reality, the first four men receive a crust; the last man, a feast.’ ☞ Also grating: the premise that four of the ten pay nothing for their meal. In reality, they pay sales tax, payroll tax and property tax (either directly or through their rent), gas tax, alcohol tax, phone tax and what is in effect the ‘lottery-ticket tax’ – a tax on hope. Michael Axelrod: ‘The thing missing when analyzing the story and the tax system is the concept of ‘utility.’ There is general agreement that the marginal utility of income decreases the more you earn. [To a starving man, $4 for a sandwich has enormous utility; to a rich man, virtually none.] This is the justification for a graduated income system. The idea is to have every taxpayer give up at least approximately the same amount of total utility in taxes. But there is no general agreement on what utility function to use. So politics determines the tax system.’ And speaking of politics . . . Kevin Rasmussen: ‘The story should include the rich guy’s making a contribution to the owner’s re-election fund, giving him far more clout in determining the distribution of the $20.’ Jonathan Levy: ‘Point #1: We are hardly in a situation where our $100 dinner now costs $80. It is more like the restaurant was firebombed a couple of years ago and now has to charge $120 for dinner in order to pay for the extra security. If we ever find ourselves in a situation where the government needs 20% less money to do the same job (maybe the day we are free from interest payments on the extra $3 trillion in debt run up under Reagan/Bush?), sure, let’s look at cutting taxes on everyone. Point #100 (since there must be 98 in-between): The stated threat is that if the rich feel too abused they are going to pack up and leave. Fair enough. This country was built by people who got fed up and quit other countries over economic conditions or oppression. Anyone who feels it is unbearable to be wealthy in the U.S. has a complete right to quit this country and become a citizen of another (assuming it is for real and not just a paperwork trick to get out of taxes). That is a basic human right but one that, so far, few wealthy Americans seem to have felt a need to exercise.’ Randy Woolf: ‘The ‘dinner analogy’ is hopelessly flawed. The main problem for me is: in the story, the diners are presented with a special $20 bonus, or ‘surplus,’ i.e. cheaper food. But the U.S has a deficit now, not a surplus. Also, in a real society, our fates are all bound together, and the well-off suffer when the poor become ‘too poor.’ A better analogy would be more along these lines: the 10 people are employees in a restaurant. A new restaurant [China] has opened with much lower prices. The 10 employees at our restaurant agree to take a pay cut so the restaurant can compete. The highest paid employees say everyone should share the pain, not just them, so everyone’s pay is cut 20%. This results in the subsistence workers’ being paid below subsistence. So the lowest paid employees are now too addle-brained from lack of food to do their jobs well. Some of them have caught infectious diseases, but cannot afford to go to the doctor, and are spreading these diseases to the customers. All the educated employees who could do so went elsewhere, so the remaining ones are too illiterate to read the health department sanitation signs. A few of the customers get sick and die from e. coli. When the place gets robbed, the security guard decides this pay is not worth risking his life for, and runs away. Business gets worse, and the highest paid decide they must lower prices – and pay checks – a further 20% to attract customers!’ ☞ And soon the entire world collapses. But if you think Randy may have gone a little over the top to make his point, how about this. How about imagining that we’re all part of an enterprise called America, Inc., and that business these days is not so hot. It isn’t terrible, by any means, but we’re dipping into the red. And we have some capital equipment – like our schools – in pretty sore need of investment. So, sporting a high credit rating, we determine to borrow $2 trillion over the next few years (by running deficits) to get us over this rough patch. Interestingly, we decide not to invest in the schools. And we decide not to help bail out our 50 subsidiaries, most of which are having severe financial difficulty. Instead, in our wisdom, we decide to use the borrowed money to give our employees pay hikes (for isn’t that what an income-tax cut effectively is? a hike in take-home pay?), but only to our higher-paid employees. Those at the bottom will get no raise. The preponderance of the trillions we borrow will go to the 5% who are already earning the most – with a very special emphasis on the top 1%. The trick is to get people to think this is (a) fair and (b) a good deal for them personally (so they will circulate stuff like that idiotic thing about the 10 men and the $100 dinner). So we tell them: ‘These tax reductions will bring real and immediate benefits to middle-income Americans. Ninety-two million Americans will keep an average of $1,083 more of their own money.’ (I bold this statement because it is an actual quote from our commander-in-chief.) We do not tell them that the $1,083 is an average, and that because the top 5% get most of the benefit (Bush: an estimated $44,000 a year; Cheney: an estimated $327,000 a year; Gates, an estimated $40 million a year), most Americans will get much less – yet all will be saddled with their share of the extra trillions we’ll be borrowing to do this. When I added that comment last week, Kevin Clark felt I had gone too far. He wrote: That ‘average savings of $1,083’ has been bothering me too. I chalked it up to the usual political hyperbole, but it is misleading. Good for you (and others) for pointing it out. But it was a little disappointing to see you then turn around and do the same thing in the opposite direction. I refer to your saying ‘most of those 92 million families would . . . be saddled with their share of the trillions in new national debt all this is leading to.’ I’m sure you know that half of all taxpayers pay virtually nothing in taxes. So it seems to me that most taxpayers aren’t being saddled with anything, much less their share. If the debt ever gets paid back it’ll be from taxes on the ‘rich,’ so it seems more accurate to say that current rich people are saddling future rich people with debt. I don’t know that that’s smart or necessary, but that’s a separate question. Well said, but I believe lower- and middle-income families do bear much of the burden when we add trillions to the national debt: Big deficits make a country’s currency weaker than it would otherwise be. That makes prices higher than they otherwise would be. It costs more to buy clothes from China or TVs from Korea or fruit from Mexico if the dollar is weak than if it is strong. Higher prices don’t much hurt the family that just got a $40,000 tax break, but they do hurt the family that is just scraping by. Big deficits likely lead, sooner or later, to higher inflation and interest rates. That’s bad news for those who owe and borrow, not such bad news for those who own and lend. Those getting the bulk of today’s tax cuts will be unaffected by higher auto loan rates. We buy our cars for cash. Those of us who already own nice homes won’t mind terribly if inflation drives their prices higher. Those less fortunate will only see their rents rise. Big deficits crowd out the possibility for other things, like smaller classroom sizes and a prescription drug benefit for seniors. Not an issue if you can afford to send your kids to private school and are covered by a top-notch health insurance plan, but a very big issue for those “fortunate” four out of ten who “pay nothing” for their dinner in that idiotic story about the 10 men who go out for the $100 dinner. So I disagree with those who believe that we need to tilt the balance further toward those already best off. And I am in awe of the Republicans’ skill at persuading so many folks who don’t earn $300,000 or $3 million that huge tax cuts for the best off are something we should go deeply into debt to provide. How much deeper into debt do the borrow-and-spend Republicans have to bury us before that moniker – “borrow-and-spend Republicans” – finally catches on? Another $3 trillion? Another $6 trillion?
Your Thoughts on the Idiotic Thing About the 10 Men and the $100 Dinner January 24, 2003February 22, 2017 But first: Going out on a date this weekend? Need a little confidence builder? You will surely want to click here. And second: Ever wonder how fast you are cruising the internet? Click here and you’ll see. (Thanks to Alan Light for this link.) I have two laptops running simultaneously from the same cable modem. The one that is directly wired to the modem clocked about 550Kbps (kilobits per second) connecting through AOL 5.0. (I can’t upgrade to a higher version because my address file is too large and AOL can’t handle it in its higher versions.) The one that connects to the modem wirelessly and by-passes AOL was twice as fast – 1100Kbps. Connecting over a plain old phone line and my computer’s built-in modem, the connection logged at 43Kbps. And third: I am indebted to Paul Lerman for this link to Jeff Brown’s Philadelphia Inquirer column on index funds. Brown points out that one should only be in the stock market for the long haul . . . and that over the long haul – according to data that Morningstar supplied him comparing the Vanguard 500 index fund with the most recent 10-year performance of actively-managed large-cap mutual funds – just 22.72% of the actively managed funds beat the index fund on a pre-tax basis. For funds held in taxable accounts, just 7.1% did. We have discussed the reasons for this many times in this space, and in my investment guide; but it’s always nice to see common sense confirmed. And fourth: Bob Daniels: ‘The repeated talk of ‘average’ tax cuts in the propaganda campaign for the Bush plan* reminds me of the line from Darryl Huff’s 1954 classic How to Lie with Statistics: The roadside merchant was asked how he could sell rabbit sandwiches so cheap. ‘Well,’ he explained, ‘I have to put some horse-meat in too. But I mix them 50:50. One horse, one rabbit.” ___________________ *Wherein, as described Tuesday, our commander-in-chief promises 92 million families ‘an average $1,083 a year’ from the latest proposed cuts, never mentioning that Bill Gates would get $40 million or so, Dick Cheney $327,000 or so, and George W. himself $44,000 or so . . . while most of those 92 million families would get much less than $1,083, yet be saddled with their share of the trillions in new national debt all this is leading to. And now, finally! Oh, my – will you look at that? We’re out of time. Please come back Monday for your very good thoughts on the 10 men and their idiotic dinner (and Tuesday for your thoughts on copyright extension).
Have You Forfeited American Express Points? January 23, 2003February 22, 2017 But first: SAVINGS BONDS WILL NOW HAVE TO BE HELD A YEAR A small change to be aware of: The minimum holding period for Series EE and Series I bonds has been extended from 6 months to 12 months beginning with bonds issued next month. But you can still buy them on-line with your credit card and get your frequent flier miles. And now: DO YOU HAVE AN AMERICAN EXPRESS CARD? If you do, you should be earning ‘Membership Rewards’ points for every dollar you charge. But if you pay late, you forfeit the points for that month. What I didn’t know was how easy it is to get them reinstated. I went to www.americanexpress.com and found my account balance. (If you haven’t signed up for on-line access, it’s easy.) I then clicked Membership Rewards and saw that I have truly a gazillion points – which I knew – but also that I had 33,980 forfeited points that I could reinstate online. As each point is worth a ‘mile,’ on several airline programs, I clicked to see how I could reinstate them and – the system being temporarily down – was given a toll-free phone number to call. I quickly reached a cheerful rep who explained, that (a) I could reinstate even more miles – this 33,980 was just the most recent few forfeits, but she could go back to 1998 – and that (b) each reinstated month would cost me $15. Well, that’s pretty decent of American Express, if you ask me. I had forfeited the points by being a little late with some of my payments – my fault, not theirs. I travel a lot and get a lot of mail and, well, these things happen. Indeed, these things had apparently happened seven times since 1998, so we went through each month, and I choose to pay the $15 for four of the seven, reinstating 48,000 points/miles for $60. Essentially, a free first class ticket for $60! The other three months’ balances were too low to waste the $15. Miles are worth a penny or two each to most people, so paying $15 may not make sense if you’re reinstating just 500 or 1000 of them – especially if you have a gazillion already and may not actually use them for a long time. Frequent flier miles’ value depends on how you use them. At a minimum, they are worth half a cent each – American Express will let you cash in points in 20,000-point increments for $100 each. (So on that basis I paid $60 for what could have been $200 in cash, with 8,000 Membership Rewards points left over.) The value of the stuff you can redeem airline miles for in the typical ‘rewards’ catalog – golf clubs, wheels of cheese – generally works out to a penny a mile. (The whole point of those catalogs is to get you to trade your miles for a penny instead of the greater value they can generally bring from exchanging them for air travel or hotel rooms.) So on that basis, I paid $60 for $480 worth of stuff. The wholesale value of miles within the travel industry is about 1.3 cents. (So on that basis, I was paying $60 to get $625 or so in value.) The general rule of thumb I use is 2 cents, because I can often find a way to save $500 by ‘buying’ a coach ticket for 25,000 miles. So my $60 bought me $960 worth of travel. Those who only travel with Saturday stay-overs or on routes served by Southwest Airlines or Jet Blue, or who can accept the uncertainties of booking through Priceline.com, and who thus may never pay more than $200 for an airline ticket or $39 for a hotel room, may not be able to save so much by using miles. To them, Amex points may be worth barely a penny, if that. Those who would normally pay $7,000 for a business-class roundtrip to Paris but can get it for 100,000 points instead, say, are getting 7 cents of value from each point. I would sooner swim to Paris than pay $7,000, but if I were that kind of traveler, my $60 would have bought me $3,360 in value. Note that American Express and Continental Airlines are currently running a promotion that gives a 25% bonus for transferring 10,000 or more Amex points into your Continental mileage account. One worries, of course, that Continental (and other airlines) may not be around forever and that any successor airline might not honor the points. So I wouldn’t do this just to do it. But if were about to book a trip with miles someplace Continental flies, and needed more Continental miles to do it, my 48,000 reinstated Amex miles would transfer over as 60,000 Continental miles. If those were valued at 7 cents each, my $60 would have bought me $4,200 in value.
Who Owns Mickey Mouse? January 22, 2003March 25, 2012 You probably saw that the Supreme Court upheld Congress’s 20-year copyright extension. The Court said it may have been bad public policy, but the Congress was well within its bounds to make bad policy on this. (Basically, copyrights already applied for the lifetime of the author and 50 years beyond, or for 75 years in the case of a corporate owner like Disney’s ownership of Mickey Mouse.) My own view – which is almost completely selfless, as I have zero intention of outliving myself by more than 50 years – is that it was actually good public policy. To me, there is a huge difference between a patent and a copyright. For one thing, a patent is generally issued to cover something that someone else would have invented sooner or later anyway. (Didn’t Alexander Graham Bell beat his closest competitor to the patent office by only a day or two?) What is the likelihood someone else would have written Gone With the Wind or created Mickey Mouse if Margaret Mitchell and the Walt Disney folks hadn’t? For another, a patent grants a monopoly on something people may really need, like a lifesaving drug or a TV remote control . . . or that, at the least, could cause a bottleneck in what would otherwise be a more prosperous economy if only competitors were allowed to manufacture it. Surely there is no such hardship if Mickey or Snoopy or Gone with the Wind remain under copyright. Copyright protection doesn’t keep anyone from enjoying these creative works. You can still get them free from the library or occasionally see them free on TV (even tape them for your own future viewing). Why should ownership of a copyright ever fall into the public domain unless the owner chooses to donate it (or fails to renew it)? Does private land automatically become public after 100 years of ownership? No. Must Coca Cola reveal its secret formula after a set number of years, so any company can make and sell Coca Cola? No. (And must the Coke logo itself fall into the public domain as Mickey’s likeness would without copyright extension? Not that, either, under current law.) Is the Van Gogh that your grandparents bought and passed down to you automatically snatched away to be placed on public display? No. You own this creative work and can even keep it hidden if you want. So why should the ownership of a copyright expire? Better, perhaps, to give copyright owners some modest tax incentive to donate or bequeath ownership to the public domain – but keep it voluntary. For the opposing view to mine, click here. But I would argue that life will go on if United Airlines decides not to pay $500,000 for the right to play ‘Rhapsody in Blue’ while you’re waiting on the runway. They can play something that costs less – there will be plenty of competition to sell them music – or play nothing at all. Finally, while I’m no copyright expert, ‘fair use’ and ‘parody’ conventions seem more or less adequate to allow a vigorous public debate and free press. If I quote a snippet of someone else’s work, to applaud or rebut it, or to help make a point of my own, that’s fair use (generally, up to 250 words). In most circumstances, no permission need be obtained or royalty paid. If I parody someone else’s work, there are special provisions for that as well. (And if, on occasion, I become a parody of myself, as at least one Republican friend has charged, I surely have not violated my own copyright.)
Two Short Must Reads January 21, 2003January 22, 2017 The market was closed yesterday, but I couldn’t hold back with the idiotic thing about 10 men going to the $100 dinner any longer. For those who missed it, Rick Hertzberg does it much better in this column from last week’s New Yorker. Rick’s essay does not deal with the dinner parable directly. But it lays bare what appears to be a related piece of fuzzy logic – a huge and purposeful deception by none other than our commander-in-chief (strong words, but decide for yourself): ‘These tax reductions will bring real and immediate benefits to middle-income Americans,’ Bush said in Chicago. ‘Ninety-two million Americans will keep an average of $1,083 more of their own money.’ The first of these claims, as the Financial Times editorialized the day after the speech, is ‘obviously bogus.’ The second is true, but only in the sense that it is also true that if Bill Gates happened to drop by a homeless shelter where a couple of nuns were serving soup to sixty down-and-outers dressed in rags, the average person in the room would have a net worth of a billion dollars. Read the Hertzberg piece if you have a couple of minutes. Does this sort of deception not bother you? Could it not have been purposeful? Is it in any way unimportant? More on all this in a few days, especially the excellent comments many of you have sent (enough! stop! please!). For now, take a look at this affecting little Forbes profile of Bill Gates, Sr., defending the estate tax. Between the two links – the New Yorker essay and the Forbes story – it seems to me a strong argument has been made against tilting the game further in favor of the best off. Wednesday: Who Owns Mickey Mouse? Thursday: Have You Forfeited Amex Points? (You can get them back.) Friday: More on the Idiotic Thing about the 10 Men and the $100 Dinner
That Idiotic Thing About the 10 Men Going to a $100 Dinner January 20, 2003February 22, 2017 Here it is. It’s been going around the Internet for nearly two years, but judging from the increasing frequency of late, it seems to have enjoyed new life. [My comments are in brackets.] I was having lunch with one of my favorite friends last week and the conversation turned to the government’s recent round of tax cuts. ‘I’m opposed to those tax cuts,’ the retired West coast college instructor declared, ‘because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that’s not fair.’ ‘But the rich pay more in the first place,’ I argued, ‘so it stands to reason that they’d get more money back.’ I could tell that my friend was unimpressed by this meager argument. So I said to him, let’s put tax cuts in terms everyone can understand. Suppose that every day 10 men go to a restaurant for dinner. The bill for all ten comes to $100. If it was paid the way we pay our taxes, the first four men would pay nothing; the fifth would pay $1; the sixth would pay $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest) would pay $59. The 10 men ate dinner in the restaurant every day and seemed quite happy with the arrangement until the owner threw them a curve. Since you are all such good customers, he said, I’m going to reduce the cost of your daily meal by $20. Now dinner for the 10 only costs $80. The first four are unaffected. They still eat for free. [Ah, what a sweet deal that man who cleans the airport urinals for $6 an hour has. He eats for free! Or how about that woman who cleans your hotel room. She, too, eats for free! Except for the payroll tax taken out of their checks and the sales tax they pay. And the tax they pay on their gasoline and their phones if they can afford gas or a phone. Why should the rest of us pay taxes to help educate their kids and provide them with health care? They shouldn’t be allowed to have kids. And if they have them anyway, those kids don’t deserve decent schools and health care. Our first priority has got to be cutting taxes for the top, not providing good schools and health care to deadbeat six year olds.] Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody’s share, then the fifth man and the sixth man would end up being paid to eat their meal. The restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same percentage, being sure to give each a break, and he proceeded to work out the amounts each should pay. And so now the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of $59. Outside the restaurant, the men began to compare their savings. ‘I only got a dollar out of the $20,’ complained the sixth man, pointing to the tenth, ‘and he got $7!’ ‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got seven times more than me!’ ‘That’s true,’ shouted the seventh man. ‘Why should he get $7 back when I got only $2? The wealthy get all the breaks!’ ‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor.’ The nine men surrounded the tenth man and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short! And that, boys, girls and college instructors, is how America’s tax system works. The people who pay the highest taxes should get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table any more. [This is why in the 1940s and 1950s, when the top federal tax bracket had been hiked to 90%, in part to help finance World War II and the Korean War, highly productive people all just retired and the American economy collapsed. Or, well, they didn’t and it didn’t – America did pretty well in the 1940s and 1950s – but that’s a minor detail. And this is why in the 1960s, when the top bracket was 70%, highly productive people all just retired and the American economy collapsed. Or, well, they didn’t and it didn’t either – the American economy did pretty well in the 1960s – but that, too, is just a minor detail.] I’m not arguing for a 90% or 70% top bracket. Or even for the 50% top bracket of the fist six Reagan years. What I’ve been saying ever since Texas Governor Bush began promising huge tax cuts for the wealthy is that the 39.6% top bracket of the Clinton/Gore era was a pretty good balance and should not be cut. Yes, 90% and 70% and all the crazy tax shelter schemes that went with them were nuts. But 28% – which was where the top bracket ended up in 1986 in President Reagan’s second round of cuts – we now know was too low. It may have been well intended, but it overshot the mark. We added $3 trillion to the national debt in the dozen Reagan/Bush years. The Bush administration inherited a good balance that was working. Their first round of tax cuts turned surpluses that were projected as far as the eye could see into deficits projected as far as the eye could see. And now, in the wake of two wars we need to finance, against terrorism and, whether we go to war or not, the buildup for Iraq, the President insists on more tax cuts (mainly, as usual, for the best off). Normally, taxes are raised to pay for wars. The Bush administration proposes to pay for its wars by cutting taxes on the rich and borrowing the cost from future generations. But let’s leave the macro level and get back to that top tax bracket. It’s worth pointing out that few people if any actually pay the top rate on all their income. In the first place, they pay less on the first dollars they earn, just like anyone else. It is a graduated rate. More important, they pay 0% on their municipal bond interest (while sacrificing much less than 39.6% in yield compared with equivalent taxable bonds) and 0% on their capital gains until they choose to ‘realize’ them – at which point they pay only about 20%. This is not to say that the best off don’t pay a heck of a lot in taxes – they do! They should be proud that they do. We should be grateful that they do. But it is a balance. And the balance under Clinton/Gore worked out pretty well for everyone – including the top 1%, who got richer faster than any other group, even after tax. So why, when you look at all the problems and challenges in the world, would you say, ‘Well, we can’t do everything, so let’s direct most of our efforts and resources toward improving the plight of the rich. Let’s shift the balance further in their favor.’ Why would you say that? The most remarkable thing about this idiotic thing about the 10 men having the $100 dinner is that it seems to be passed around the Internet not, for the most part, by people with adjusted gross incomes in excess of $383,000 a year (the top 1%), but, rather, by people so eager for $1,000 and $2,000 tax cuts that they don’t bother to take into account the extra $20,000 or $40,000 in national debt they and their children will be taking on in return – money borrowed largely to give much, much larger tax cuts to people like George Bush (whose annual tax savings have been estimated at $44,500) and Dick Cheney ($327,000). Not to mention the really rich. # PROGRAM NOTE: Don’t miss Brother/Outsider on PBS’s ‘P.O.V.’ tonight. It’s the life of Bayard Rustin – and a part of the Martin Luther King ‘I have a dream!’ story that many do not know. Supporting cast includes a much younger Strom Thurmond. Where I live, P.O.V. comes on at 10pm.