Lecture Notes 9-23-12
To: Mr. Romney
Subject:
In the Defense of the One Percent.
A new class is forming world
wide. I call it the New Middle Class.
The British first used the
term, middle class, to describe the class which occupied the place below the
Landed Aristocracy yet still above the working classes both white collar and
blue collar. In America when we discuss
the middle class we mean the most numerous class. There is not the same awareness of classes as
the British identify.
Americans include just about
everyone who is working, from plumbers to lawyers, in the middle class. It is virtually a mathematically determined
category.
It is this British concept of
middle class that I am thinking of when I defend the One Percent. This One Percent is above the upper class
(and middle class) but below the so called New Class of government leaders, and
the menagerie of toadies and hanger-ons, including the lobbyists, journalists,
and power brokers.
My defense of the One Percent
can be stated in just one sentence.
Would you rather have Mr. Obama in charge of Bill Gates’ estate? Do you want all the power to be located in
the hands of the New Class who already control the vast apparatus of the modern
state?
By inserting into our society
the One Percent we create a new power center to counter balance the power of
the state. These One Percenters, most of
whom are very savvy characters, can
compete with the state in carrying out new programs and projects that are
beneficial to our society.
Take for example Bill Gates’
investments in research for a cure of Malaria. The state could have lead the
way on Malaria but the New Class wasn’t interested. These One Percenters as I have said are very
savvy and form not only an alternative center for action in the world but an
alternative perspective to see what is needed in both private and government
affairs.
It has been argued that this
New Middle Class uses its wealth to manipulate the state for their own and sole
benefit. It is true some have used the
state to manipulate the market. Mr. Slim
in Mexico for example. This would argue
for the Republican Party’s stance that the state should stand at arms length
and let the market determine winners and losers not for the Democrats stance
that the New Middle Class should be taxed out of existence.
For reasons explained
elsewhere, without wage and price controls, the New Middle Class will respond
to higher taxes by transferring the higher taxes via the price mechanism on to
their customers. Remember the One
Percenters are rich because they offer
goods or services that are in high demand.
This demand allows the One Percenters
to transfer their costs, including taxes, on to their consumers. Unless wage and price controls are applied
there is no limit to what the One Percenters can charge.
When we say someone is rich
what we mean is that their goods and services are in high demand. Most of us have a more limited ability to
pass on our costs including taxes,
because the goods and services we offer are in less demand, meaning that
we must absorb some costs including taxes.
The poor are poor because the
goods and services they offer are in low demand. The poor have a low ability to transfer their
costs including taxes.
The One Percenters’ goods and services are in
high demand perhaps in part because they reduce the number of people in the
middle or the poor classes that are needed by their customers. Mr. Ellison for example may supply Oracle
products and services that reduce the number of accountants (middle class) and
file clerks (poor class) needed by his customers.
And this may cause you to think
we should tax the One Percenters. But
without wage and price controls the high demand for their goods and services
will allow the One Percenters to pass on their taxes to the other classes who
have lower demand for their goods and services.
The One Percent pay 40% of the national income tax. Where do you think the One Percent gets the
money to pay these taxes? From the other
classes via the price mechanism.
This is the real reason why
taxes should be kept as low as possible, because taxes settle into society on
those with the lowest ability to pass on costs to customers: the poor.
The New Middle Class may be involved in the
process of creative destruction, which negatively affects the other classes but
this is inevitable and certainly taxing them will not change a thing. Or do you think technological progress should
be outlawed?
Republicans have long argued
that corporate taxes are passed on by the companies to their customers through
the price mechanism. This is certainly
true for successful companies, those whose goods and services are in high
demand. But if this is true for
companies why should we be surprised that the New Middle Class can also pass on
its taxes and other cost?
PS And
I think Iran’s nuclear program should be destroyed and the regime must be over
thrown.
