That's How the Light Gets In

That's How the Light Gets In

On Economic Perspective

$Million per day

My argument in today's blog is that the rich, especially the ultra-rich do not need protection from people advocating redistribution of wealth downward. I'm recalling "Joe, the Plumber", (who was not named Joe and was not a plumber) who was used by a conservative Presidential candidate to exemplify that liberals would try to tax away the opportunity to start a business and become wealthy. Also, I've been accused of being a conspiracy theorist when I've complained that the ultra-wealthy collude to protect and increase their massive wealth.

So, I'll address three issues at once:

1. Are we trying to deprive the wealthy of their lifestyle?

2. Do ultra-wealthy have the time, resources, and inclination to conspire to strongly influence politics and economics?

3. To get an idea of economics in general, it helps to have an understanding of wealth.

My answers are 1) No, and 2) Yes.

Most people's eyes glaze over when you start talking math, so I've come up with a way to picture it that's more fun (by the way, keep "glazing over" if you want to be a mark for the exploiters, and remain poor all your life). Many people fantasize about winning the lottery. Some, like my wife, even plan out exactly how they'll use the winnings. So, let's do that.

Imagine you won a million dollars. What would you do with it? Here's a sample:

(For the purposes of this example, let's stipulate that the taxes have already been paid, and this is only for spending, not investing. So, we're not going to buy stocks and bonds, or start businesses.)

Buy a new house, a car, a boat, new clothes, put money into a college fund for your kids, and put money into savings:

(Spending is not typical. Results may vary. I've left out gambling and drug addictions, which could drastically change these examples, but you get the idea.)

$200,000 average home in US

50,000 new car

50,000 boat

50,000 new clothes

150,000 college fund for kid 1

150,000 college fund for kid 2

100,000 dining out for two at a nice restaurant every night for a year

250,000 retirement/savings

Now, imagine that the next day, you win another million. (By the way, if you work for 40 years at $25,000/year, you'll make $1 million in your life. Some corporate CEO's or Wall Street investment managers make $100 million to $1 billion in a year.)

Day Two:

$100,000 jewelry

50,000 furniture

50,000 appliances

10,000 entertainment center

200,000 vacation (this would take a couple around the world and then some)

20,000 massive party

100,000 gifts for friends and relatives, and charities

200,000 another house (vacation home?)

70,000 pairs of season tickets to 2 or 3 teams, or NASCAR, etc.

200,000 left over (I'm already starting to run out of things to buy)

Now, imagine that the next day, you win another million.

Day Three:

OK. Now it's getting tough. Maybe you buy a yacht and hire a captain and crew. Hire a butler, a couple of maids, etc. Correction: I just looked up yacht prices. They average around $80 million, so we'll have to save up for that.

$150,000 butlers and maids

100,000 membership in golf country club

100,000 paintings

150,000 graduate school, kid 1

150,000 graduate school, kid 2

200,000 motor home or some motorcycles and all-terrain vehicles

150,000 savings

Originally, I thought I would need to extend this out to 10-12 days to firmly establish the concept of massive wealth. But we're only through day 3. Let's see what we've got so far:

a house, a vacation house, a car, a boat, an RV, clothing, appliances, furniture, an entertainment center, jewelry, paintings, butlers and maids, a year-long round-the-world vacation, a massive party, season tickets and country club membership, college and grad school for two kids, dining out every night, donations to charities, gifts to friends and relatives, and $600,000 in savings. Whew!

Let's do this: imagine a million a day for a week and you can double all the purchases above, and have a total of $2.2 million in savings. One week. $1 million per day for one week.

Now imagine $1 million a day for one month. All that stuff above plus $25 million in savings. You can start to think about the yacht. But, obviously, this is plenty for most average folks. Now, 1) Are we trying to deprive the wealthy of their lifestyle by taxing them at a higher rate. No, not in the least. Or perhaps, in the least. So small an increment of their wealth that it would go unnoticed by all but the greediest; and, 2) Do ultra-wealthy have the time and resources to conspire to strongly influence politics and economics? Yes.

Let's reverse the game. Instead of getting $1 million/day, you spend $1 million/day. Billionaires spent hundreds of millions in the 2016 elections, not just for president, but for congress, governors, state legislators and officials, etc. The Koch brothers (Charles and David) hired 1600 "community organizers" in 36 states.

Let's do that math on that last one: 1600 x $50,000 each for a salary (I'm just guessing) = $80 million. That's only $220,000/day. At that rate it would take the Koch brothers 1200 years to go broke, providing they had no income for over a millenium, and they got nothing back from their investment. I'm guessing they get a lot back. In the 20 years or so that I've been aware of these guys, their estimated combined wealth has grown from around $50 to $96 billion. That's a billion each every year for 20 years.

Of course, they don't spend all their own money; they collaborate with other wealthy folks. They created ALEC, the American Legislative Exchange Council. This is an organization of corporations and ultra-wealthy who write laws and pressure legislatures to pass those laws which are favorable to their interests. This generally means lowering or eliminating taxes, changing environmental or labor regulations to shift expenses to taxpayers, or granting contracts for high-dollar projects to their companies, etc.

Obviously, these ultra-wealthy have the resources to form any associations they desire. Many of them sit on several corporate boards. If they want to meet together, they easily can and do.

Here are the top ten billionaires for 2016 according to Forbes Magazine:

1. Bill Gates $86 billion

2. Warren Buffet 75.6

3. Jeff Bezos 72.8

4. Amancio Ortega 71.3

5. Mark Zuckerberg 56

6. Carlos Slim Helu & family 54.5

7. Larry Ellison 52.2

8. Charles Koch 48.3

8. David Koch 48.3

10. Michael Bloomberg 47.5

------

$612.5 billion

These are ten of 2,043 billionaires.

If they do not associate occasionally and make plans to protect and increase their wealth, that would be a non-conspiracy theory.

It's difficult to imagine how much $86 billion is (even with our exercise above), so, here are a couple of ways.

1. Bill Gates could spend $1 million/day for 235 years.

2. Let's say that over the course of your working lifetime you amass $1 billion by age 65. You could then retire, never earn another penny, and spend $100,000 per day for the next 25 years until age 90. At that point you would still have over $80 million left to take care of yourself for your remaining years.

Summary

We can develop a different economy. It can still be based on capitalism, but there are different kinds of capitalism, just as there are different kinds of democracy. We can have environmental, socially just, monopolistic, or broad-benefitting capitalism, to name a few examples. We can combine elements of those different forms. We could have capitalism that incorporates socialism in some areas, such as European and, to a lesser extent, the economy we have in America today.

I don't think it is a good idea to continue to support economic systems that funnel nearly all the wealth in the world upward to a few individuals and families, but that is what is happening now. Right now, approximately 400 families have a combined wealth equal to the wealth of half of the people in the world, over 3 billion people.

Conservative Presidential and Congressional candidates talk about giving money to the "job creators" (They don't say "money", of course. They say, "tax breaks", or "eliminate regulations", etc. But it comes down to money). First of all, the people in this category don't always create jobs. Often, they consolidate their wealth, sometimes moving it out of the country to avoid paying taxes. Some got their wealth by buying companies, bankrupting them, putting the employees out of work, and selling off their assets. I heard one billionaire say that the "job creator" thing was a bad idea. (No, it wasn't George Soros or Warren Buffet or any of the well-known liberal rich guys, but, I'm sorry, I don't remember his name.) He said he couldn't possibly spend enough to influence the economy, nor did he have the desire to take the risks necessary to create new companies and, thus, create jobs.

So, here's a final question: What's better for the economy and the common good:

1 billionaire or 1000 millionaires?

millionaire millionaire millionaire millionaire millionaire millionaire millionaire millionaire millionaire millionaire

OK, I can't resist. Here's another way to look at it:

The little box below represents a millionaire. The big box is a billionaire.

Ten top billionaires or 612,500 millionaires?

- Pete Barkett, May, 2017

That's How the Light Gets In

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