March 28, 2009
POLITICS: What Kind of Fool is Matt Yglesias?
a) The kind of fool who has never held a real job?
b) The kind of fool who thinks there's nothing un-American about using punitive taxation to drive the best baseball players in the world out of the United States?
c) The kind of fool who has been drinking too much bong water?
Judging by this post, probably all three?
Some people, as I understand it, just don't think inequality is a problem. But for the egalitarians among us, I've never really understood the view that obscene executive compensation is an issue that absolutely positively certainly must only be addressed through the indirect Rube Goldberg-esque method of changing corporate governance rules. What if we had a 95 percent marginal tax rate on income over $10 million? What dire consequences would flow from this? Perhaps a certain outflow of top-flight baseball talent to Japan. But I don't see this leading to any kind of economic calamity. Producers of certain classes of supply-constrained luxury goods would lose out as their prices go down. But my strong suspicion is that at the end of the day most of the super-rich would ultimately find it a relief to get off the treadmill of status-competition and the not-quite-so-rich would be thrilled to see their betters cut down to size.
Pejman and Michael Moynihan have a good deal of sport with this insanity and the greed, envy and lust for power that drive it (he's not suggesting burning the money, after all, but giving it to powerful politicians to spend, presumably - these days - politicians he's hoping will listen to the advice of Matt Yglesias) as well as the complete failure to comprehend that we do not live, as liberal economics so often assumes, in a closed and statis universe, but rather in a world of competitiveness and response to incentives. Only a fool of colossal proportions would believe that one could enact such a draconian tax policy with no consequences, but so often we hear these arguments (we hear them as well from the president regarding limiting charitable deductions) from liberals who simply assume that the economy is a money machine that can be loaded down with an unlimited number of burdens with no consequences. High marginal tax rates? Rent control? Generous welfare policies? Nah, it's inconceivable that human beings, being the self-interested creatures humans are, would alter their behavior even the slightest in response.
Let's consider Yglesias' example: baseball, specificallly the New York Yankees, whose payroll last season included 13 players making more than the wholly arbitrary $10 million figure. Presumably, even Yglesias isn't so dense as to believe that the Yankees would continue awarding salaries over $10 million under such a tax regime - he refers to his confiscatory tax proposal as "a de facto cap on compensation" - so the money would....stay with the team? Which raises the question of whether he would apply the same tax to the owners of the team, or the large shareholders of other enterprises. If he doesn't, then he's basically just redistributing wealth from the employees of an enterprise to its owners; if he does, then what he's proposing is more radical still, the destruction of enterprises that provide more than a certain amount of value (as measured by the revenues they raise from the choice of consumers to spend money on their product) - and that does seem to be his intention, as he says that "[t]he lack of ceiling on executive compensation creates bad incentives for firms to grow into unduly large conglomerates rather than be content to exist as highly profitable medium-sized enterprises," without considering the fact that given economies of scale and, in the case of a business like the Yankees, the fact that it simply can't create the same amount of value if you break it into little pieces with the coercive power of the state, you are simply destroying the value large enterprises deliver to consumers.
Finally, an irony: if the enemy is bigness, and if it's no problem at all to replace large enterprises of vast scale with many smaller ones that cater to smaller, perhaps regional markets, then shouldn't Yglesias be championing federalism? After all, the federal government is nothing if not the ultimate embodiment of conglomeration of many previously local functions into one colossal enterprise of continental scale. If that's a bad thing, however, it has wholly eluded Yglesias' notice.
a) The kind of fool who has never held a real job?
Being a writer isn't a real job? Since when?
c) The kind of fool who has been drinking too much bong water?
Ah... stay classy. You do it so well.
Jeez, whaddaya think, multinational corporations move their most highly compensated executives to offices in countries with lower tax rates.
I look forward to an office building boom in Toronto were this to occur.
Maybe Matt thinks that the baristas at Starbucks can shoulder the whole load for the governmental infrastructure of NYC and NY State
Let the man talk, Crank. I can't think of any better thing that could happen for the Republicans than for the Democrats to keep waving around 90%+ tax brackets as a legislative possibility. It would require Harry and Nancy to be idiots in order for them to decide to push MY's plan, but it's a given that they're idiots. I'd love to see Obama have to deal with the question at press conferences, too.
The kind of fool whose mommy & daddy got him a legacy into college where he got a degree in philosophy.
I mean, really.....philosophy. Must be a northeastern thing where the college one graduates from is more important than the degree.
I do love it when all these young lefty grads (Yglesias, Klein) come out spouting the exact same thing their Marxist professors told them to think & they're regaled by their left-wing comrades as some sort of new thinkers.
I mean, really, a young lefty ideologue who pushes wealth envy & income redistribution; Impressive "new" thinking, huh?
BTW, I know for a fact that M.Y. started at the American Prospect at $31,500/yr, so I can easily understand why he's envious of those who actually succeeded in life....but, he's quite young & has the opportunity to earn, so his envy is quite the insight into his soul. You can tell a lot about a man, that way...
Look, let's put aside the slights at this guy's income/profession and his motivations for believing what he believes. It's a complete fiction to think that they only way to be a liberal democrat is to be: (1) rich and guilty, or (2) poor and jealous or lacking in motivation.
That being said, his argument is wrong, for many of the reasons Crank pointed out. I do think "too big to fail" is part of the problem, but taxing those big corps to death is -not- the solution. I'm not sure exactly what -is- the solution - maybe it's something along the lines of raising their capital reserve requirements in the case of banks.
And this is hardly the strongest argument that "liberal economics" (whatever that means) has to say about income inequality. Their stronger argument is that if income inequality gets too extreme/skewed, you have inequality of *opportunity.* You really don't want the US to turn into a 3rd world economy, with a large mass of people being unable to afford (think of the costs of college) to have a shot at generating wealth and contributing to the US economy.
MVH - I do think this story is as significant for what it says about Yglesias himself, since he is a very big star in the liberal blogosphere. That said, the reason I have trouble with even beginning to argue economics with people on the left is their insistence that there are never any consequences to their proposals, which derives directly from a refusal to recognize the reality that people respond to incentives. Yglesias' post is a classic example of that mentality; rather than argue that the economic downside (let alone the downside in lost liberty) of his proposal is worth the cost, he simply assumes the downside away.
dave - Yglesias went straight from a fancy prep school in Manhattan to Harvard to blogging professionally, and so far as I can tell, much of his income as a writer has come from left-wing donors/interest groups. I'm not a believer in the "if you haven't lived it you can't write about it" school of thought, but I do think his appalling ignorance of how business operates is a direct result of living his entire life in a coccoon insulated from the business world.
"MVH - I do think this story is as significant for what it says about Yglesias himself, since he is a very big star in the liberal blogosphere."
That's fair enough. It's a little sad that he saw fit to publish that.
MVH, it wasn't meant as a slight. There are a lot of college grads who would be quite happy with 31.5K (no comment on whether they'd prefer a degree in philosophy). Just noting that it's akin to the 450 lb. guy sitting in his easy chair munching on buffalo wings while complaining that C.C. Sabathia should be in better shape since he's making all that money.
Sitting in one's chair & noting how other people should be forced to do without all that stuff that they've EARNED, since you know they don't need it since you don't, is quite easy.
BTW, I like MY, for the most part, but he is AMAZINGLY ignorant of the basics, especially economics. The first time I came across his original site (back when he was using Moveable Type) was an entry where he called for doing away with the payroll tax - altogether - for the "working poor".
Not a joke.
After I informed him that the payroll tax credits are what give the "working poor" their social security checks when they retire and that if they made no payments into SSI then they'd be receiving no SS checks and that the only recourse was for him to call for outright income redistribution whereas people paid nary a penny into social security but yet still received the checks upon retirement (and a few "go ahead, Matt, get a Democratic congressman to propose that" barbs later), he demurred. But, that still was a huge window into that which is the liberal arts degree ignorance (no offense to anyone, just noting that a lot of the basics are overlooked).
I recall a "big" lefty blogger who thought that Bush was the person who raised his mama's property taxes, too. And, yes, you guessed it: that was also a young very-left recent graduate with a less-than-stellar degree, who walked straight into lefty blog stardom, despite an achingly miserable level of ignorance. I mean, we're talking below-Willis levels of ignorance...
I get your point, though, and apologize for the tone of my initial comment; seemed as though I was cutting on his salary. I wasn't. It's more than my wife made before she recently lost her gov't job, actually.
"I get your point, though, and apologize for the tone of my initial comment; seemed as though I was cutting on his salary. "
Hey, no need to apologize to me. The guy did seem completely ignorant about economics. Dan called him a fool - that seems about right.
An American baseball player moving to Japan wouldn't help the player in any event. The US taxes its citizens on worldwide income. Thus, as noted, the real result would be salaries below $10 million. I don't think any U.S. player would be lost to Japan, because a Japanese club would have to pay so much more to make it worthwhile if the player keeps only 5% of the excess. Yet another example of Yglesisas's deep understanding of the impact of his proposal. I suppose he could say he was referring to non-American players going to Japan instead of here, but that's clearly not what he meant.