The Forgotten Man

[AZ_Value]

That youtube video was a waste of time. Same old tired nonsensical arguments "don't take from me to give to the lazy"

 

Buffett likes to use a boxing analogy when this debate comes up so I'll do the same. I don't know what the actual numbers are but for this coming saturday's fight, I would guess that Floyd Mayweather will make anywhere between $20M and $40M. Now this nonsensical argument will have you believe that he has done it all by himself, but Buffett always says, fighters back in the 60's trained as hard as Mayweather does, and they could also throw mean punches, but the difference is just that back then their reward would be limited to however many people could fit into the Madison Square Garden or wherever the fight took place, on the other hand for Mayweather, America "the Society" has advanced and provided him with HBO so that the audience could be extend by tens of millions, it has provided him with satellites so that they can collect international viewing rights and increase his pay etc... It is a shortsighted idea to say that Mayweather did it all by himself, what part did he play in putting satellites in space or inventing HBO pay per view?

 

So all that Buffett argues is that those that get the most benefit from what America "the Society" provides to its citizens (Yes, he means the wealthy), have the duty to give more, that's all, because if you were to take away what America brings to the table in whatever your success story is, be it a successful boxing career or a successful career as a money manager, I am not so sure you'd still be holding the same "I did it because I worked hard" speech. I am not sure how successful Mayweather would be if you take away what America will bring to the table this Saturday but something tells me that he wouldn't be making $40M in Kazakhstan.

 

And plus, what is this idea that people on the lower end don't work hard? Has anyone ever tried to work as a construction worker building highways under the Phoenix sun and tell me it's not hard work? Whenever I drive past some of those guys I wonder how much you'd need to pay me to do that work.

On a different thread I gave the example of a lady that serves lunch at a local restaurant over here who shared her details with me, she works every single day and is raising alone 3 kids on some $25-30K per year. She pays payroll taxes on every paycheck she gets, but she probably pays no income taxes, so she is among what some like to call the lazy free riders that don't pay any income tax at all? Really? what more can she realistically give? Doesn't it just make sense to ask Buffett to pay more than 17% on his $40M of pretax income than to complain about this lady not paying income taxes? Or to ask hedge fund manager to pay taxes like everybody else in the country instead of that carried interest as capital gains BS before we point the finger at her? Has anybody ever asked those that say stuff like that if they'd be willing to switch with her then? I mean, if she's enjoying such a good life free riding on the back of the real hard working people, it should be a no brainer.

 

[AZ_Value]

Furthermore, the success in the class room is predicated primarily on your effort. There are some other factors to consider, too. However, your success in life is based also on effort, but much, much more towards luck.

 

 

You really think that success in the classroom is very different from success in life? Do you really think George W Bush would have gone to Yale and HBS if he had been born as Bill Clinton or Barack Obama?

 

And, I'm sure all of us have come across people who excelled in school despite working less hard than others; and, people who put in intense effort but somehow never seemed to do very well.

 

Success in the classroom is as dependent on luck (innate skills, socioeconomic class, ability to afford tutors, quality of school and teachers etc).

 

I'm all for fairness and progressive taxation. All I am saying is that causes and solutions are more complicated. Hedge fund manager taxation is a great example. Everyone knows it is ridiculous that they pay capital gains tax rates on their carried interest. Why is this allowed to persist? Is the problem with the tax code or is it with the rules on lobbying or campaign finance?

 

As for the benefits that a billionaire hedge fund manager brings to society, the argument is no different for millionaire/billionaire showbiz or sports celebrities. Is it a legislative problem? No. It is simply a reflection of the values of a particular society at a particular time and you cannot legislate that away.

 

I actually agree with a lot of what you say. Nicely said.

 

But to me your last sentence of the second to last paragraph is very key, those at the top can be blamed for exercising their oversized power to keep harmful policies in place at the expense of the rest of the population. It simply makes no sense at all to have Buffett pay the lowest percentage in his office. If the idea is not to help the weak by harming the strong, then at the very least don't harm the weak? Doesn't that make sense, I don't care if the country as a whole decides that revenue collection needs to mirror the 17% that Buffett paid (I would disagree with it but if that's what the people want, fine), then cut spending on everything that is provided to the US population, and have his secretary pay 17% also, but you can't have him pay 17% and his secretary pay 35%, it's just crazy.

[oec2000]

But to me your last sentence of the second to last paragraph is very key, those at the top can be blamed for exercising their oversized power to keep harmful policies in place at the expense of the rest of the population.

 

This goes to my point about tackling root causes. That's why I feel that calls to increase tax rates on the rich are too simplistic. It does not recognise the fact that the rich will always use their power and resources to seek out, negotiate and make use of loopholes to reduce their taxes. IIRC, it's like the situation when the Clinton administration tried to control executive pay by limiting its tax deductibility and created the opposite result - it caused an explosion in (if my memory is reliable) stock option grants which increased CEO compensation much more than before.

 

The wealth disparity issue has other causes that are not so easily redressed by fiddling with tax rates. Take negotiating power. People with unique and highly sought after skills have huge pricing power. Star celebrities and hot shot traders will probably ask for and get paid more to compensate for higher taxes. At the other end of the spectrum, the less skilled's pricing power will be determined by how easily their jobs can be exported to low cost economies. We all understand how much moats drive corporate returns; it should not be difficult to understand that similar dynamics apply to individual returns. You can raise tax rates for the ratings agencies and cut the rates for airlines but the disparity in returns will persist.

 

Rather than merely raising taxes on the rich and then transferring them to the less skilled, perhaps the solution is to use the taxes to improve educational and vocational training facilities to help them develop more valuable and less transferable skills that will improve their pricing power.

 

This is why I think it is useful to think in terms of the education and sports analogies. Because our views in these fields are less likely to have been "poisoned" by partisan talking points, people are more likely to make more thoughtful comments. So, for e.g. in education, I suspect few will advocate a straight transfer of grades from strong to weak students while many would support providing help (extra classes, tutoring) to the weak. While the particular video posted by Onyx may have been "stupid," I don't think the concept of levelling the playing field in education is so different from progressive taxation - it is not inherently stupid.

[Myth465]

I am currently reading Everything is Obvious which is a great book. It talks about how everything seems obvious, only after the fact. As I said earlier I dont have all the answers, but it seems that removing the progressive tax system would only exasperate the problem. The goal of the video is quite simple.

 

You have a wife, lets share your wife with people who dont have one. I mean you only need her for a few hours a day.

 

No

 

Why are you against it.

 

Its not fair.

 

Well thats how a progressive tax system works for the federal government.

 

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My example is quite silly, but its really no different then his. I just think thats a stupid and immature way to conduct a conversation or have a debate. A few people will think its ingenious or cute, but ....

 

I think things will get better before they get worse, and most of the recommendations from the right appear at least on the surface to only increase the gap. Perhaps raising taxes isnt the solution, but I dont see how continuing the experiment of cutting taxes will help. Its just not obvious to me.

 

A simple solution to me though would be to look at countries who either have reduced the gap or dont have a huge gap and see what they have done. My guess is many Scandinavian countries will be on that list, and my guess is everyone knows what they do. I think we know what works, the question is does anyone actually think its a problem. I dont think the poor really know whats going on at this point, and I think the elites are fairly happy with the status quo. So we wait and see how things play out...

[oec2000]

You have a wife, lets share your wife with people who dont have one. I mean you only need her for a few hours a day.

 

No

 

Why are you against it.

 

Its not fair.

 

Well thats how a progressive tax system works for the federal government.

 

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My example is quite silly

 

You're right - it is a bad example. Since the male/female ratio is about 1:1, there is no shortage of mates so there is no reason for me to share my wife if I only have one. On the other hand, if I had more than 1, than maybe the argument would make more sense. That's why we have laws against polygamy, I suppose.  ;D

 

Seriously though, what do you think of the idea of progressive grading in education? This was my original question to you; not why you thought the video was dumb. I honestly think it may not be bad idea if college entrance requirements are adapted to take into consideration socioeconomic status and quality of high school. It is not so different a concept from progressive taxation but helps people where it really matters. This "teaches a man how to fish" as opposed to progressive taxation which simply "gives the man a fish."

[Myth465]

To be quite honest I dont know anyone who simple failed out of college or couldnt get in. Community college usually has no barriers, alot of not so great colleges have no barriers, and everyone knows for profit schools have no barriers.

 

Im fairly young and also found and think College is fairly easy. Most people I know dont succeed at it because they are lazy, were going for refund money, had a kid, couldnt afford it, or screwed around too much (drugs, sex, ect). Honestly I think most 50 year olds would be disgusted by what is considered the typical college experience. Also I dont think most of college is really value added. Its another hoop you have to jump through, but alot of it doesnt prepare you for the real world.

 

At its current price its an interesting investment. I much prefer trade schools and apprenticeships similar to what they have in Austrialia or Germany. My issue is you will always have a 15% - 20% that will basically make up the bottom. Given everyone a college degree does nothing to solve that. I have been to countries where the cooks and taxi drivers had law degrees. Hell Spain is heavily degreed and that doesn't help much. A lot of knowledge can be taught, but I don't think general intelligence, skill, work ethic, and drive can be. Some people aren't going to have. The real question is what type of society we provide or allow for those who unfortunately lack some of these things. Also there arent enough skilled jobs for all of these folks anyway. There arent enough jobs for the current crop of college grads....

 

Some say cradle to grave care (actually no one does) and some say god helps those who help themselves. Im somewhere in the middle.

 

Sorry for missing your original question.

 

http://www.fredoneverything.net/Commentators.shtml - My thoughts were shaped a bit by this.

 

I often see victims of Commentator’s Disease arguing against the minimum wage on abstract grounds of economic theory. It is what commentators do—bandy abstractions, railing for or against Keynes, assaulting their ideological opponents with pointed phrases. They have never had to do the arithmetic of forty times the minimum wage minus taxes minus bus fare minus rent and gotta pay the cable because it is the only thing they have after work. They have never had to choose between the electric bill and a new coat as winter comes on.

 

The commentators don’t realize that not everybody is like them. Those with IQs of 140 and up (130 gets you into Mensa, I think) unconsciously believe that anything is possible. Denizens of this class know that if they decided to learn, say, classical Greek, they could. You get the book and go at it. It would take work, yes, and time, but the outcome would be certain.

 

They don’t understand that the waitress has an IQ of 85 and can’t learn much of anything.

 

Conservatives think in terms of merciless abstractions and liberals insist that everyone is equal. Not even close. Further, people with barely a high-school education and low-voltage minds regard any intellectual task with utter discouragement.

[ERICOPOLY]

Honestly I think most 50 year olds would be disgusted by what is considered the typical college experience.

 

Speaking for someone who is 38, you describe it as I remember it.  I'm not sure 12 more years (to 50) makes much difference.  The world is still cruel to those who aren't born bright and/or don't plan carefully for the future.

 

[Rabbitisrich]

Speaking from my own experience and those in my circle, college seemed like such a foregone conclusion that high school became extended childhood before the jr. adulthood of college. Grades and SAT scores aside, college could become much more productive if children are trained to aggressively search for their interests and talents at a young age.

 

 

 

[Myth465]

Honestly I think most 50 year olds would be disgusted by what is considered the typical college experience.

 

Speaking for someone who is 38, you describe it as I remember it.  I'm not sure 12 more years (to 50) makes much difference.  The world is still cruel to those who aren't born bright and/or don't plan carefully for the future.

 

Damn I hope I am retired at 38, lucky or / and smart man........

Also agree about the world.

[ERICOPOLY]

Honestly I think most 50 year olds would be disgusted by what is considered the typical college experience.

 

Speaking for someone who is 38, you describe it as I remember it.  I'm not sure 12 more years (to 50) makes much difference.  The world is still cruel to those who aren't born bright and/or don't plan carefully for the future.

 

Damn I hope I am retired at 38, lucky or / and smart man........

Also agree about the world.

 

At least it's not 1997 when you left college.  I started working on Aug 4th, 1997.  The S&P500 was about 900.

 

You have a huge advantage.  My generation got the SHAFT!

 

 

 

 

[Myth465]

 

At least it's not 1997 when you left college.  I started working on Aug 4th, 1997.  The S&P500 was about 900.

 

You have a huge advantage.  My generation got the SHAFT!

 

LOL reading about your MSFT options makes it hard to argue. I am wonder what its like investing in a bull market. I see why people who went through the depression were scarred for life and had trouble throwing things out and spending money...