In a world gone mad, it is being bruited about that it is time for the rich to pay taxes. This heresy infects the hoards of little people running amuck, like the assault on the Bastille. The prospect of eliminating tax breaks for the rich, the golden mantra of the Reagan years of trickle down economics and the national anthem of the McCain campaign, is seen as cannibalistic by those whose privileges may be eroded. Why should the rich have to pay for anything? After all, the more money they have, the more they are likely to invest, creating opportunities fort the lumpen proletariat. Right? Well, sometimes yes, and sometimes no.
Why would the rich invest in a declining economy? Would they perhaps try to await complete collapse so that their investments are at the absolutely lowest cost to them? Wouldn’t they hoard their wealth, with a few exceptions, like Warren Buffet and Bill Gates?
Last Sunday the Houston Chronicle ran a story about the Houstonian families Searles, Baker and Jones, back at the onset of the great depression. It is really a tale of three cities, and it goes like this.
Fearing that Houston banks were about to fail, these family leaders of Houston banded together to bail out the banks. They not only invested, but they also campaigned amongst large depositors to convince them to leave their money in the banks. Since this is Texas and Texans are more effective negotiators as well as more risk tolerant, they prevailed and the Houston banks never failed during the depression.
They then went to Henry Ford and tried to enlist him on a similar plan for the banks of Detroit. Old Henry told them to go to hell and the Detroit Banks all failed.
Then they went to New York and tried to sell their idea to J P Morgan. He also told them to go to hell and the New York banks failed.
The moral of this story is that trickle down may not be as reliable as its proponents claim. Furthermore, under trickle down, Americans don’t pay for our extravagances out of our own pockets. We borrow from the rest of the world. We are now, as the consequence of that notion, the planet’s largest debtor nation. The world is not exactly looking to us as their economic leader.
But if we should decide to pay our own bills for everything that we absolutely cannot neglect, like infrastructure, medical care and education, we will eventually recapture our leadership role, albeit as co leader from now on. Will we try to elect the last Reganite or do as the Houstonians did when it was time to ante up?