Which . . . → Read More: What’s fair? Capitalism or Socialism?]]> Nobody with a pulse can deny that there’s been an ongoing, heated argument in politics and pop-culture that pits “the rich” against “the poor,” the flames of which have been fanned by the Occupy Wall Street (OWS) movement. OWS supporters would have you believe that they’re fighting for the rights of the worker class against the perceived abuses of the “elite.” “Class warfare” it’s being called in some circles. Really? Is it really wealth envy that’s driving this argument? Or is it really a coming tipping point in a centuries-old philosophical discussion regarding the merits of Capitalism vs. Socialism?

Which is fair? Socialism or Capitalism?

There are elements of our society (the “99%”, the OWS crowd, and our current President among them) who would have you believe it’s Socialism.

They would have you believe that in a world where any one person (or group) has the skills, creativity, and bravery to do something extraordinary, that it’s somehow immoral for them to be able to profit from it. And if they should find a way to profit from it, then it’s the government’s duty to force them to “share” that profit with those who possess neither the skills, creativity, nor gumption to attempt anything even remotely exceptional with their lives. That just their mere existence qualifies them as a recipient of the spoils of someone else’s exceptionalism. In other words, they are entitled to impose on someone else’s time, skills, and resources without ever having done anything to earn it.

In the world of Socialism, where’s the motivation for the talented to make such an effort? If I know that any extra effort on my part will only benefit someone else, why should I make that effort? Sure I care about people and will go out of my way to help them – IF I feel that they’re deserving of my efforts. But I’m not gonna go out & build a multimillion dollar business for someone else.

In fact, statistics prove that employees tend to do only as much work as is required to keep them from being fired. (For proof, just google “how much effort employees,” “shirking,” and “propensity to withhold effort.”) Unless there’s some personal incentive in it for them, they’ll not expend the extra effort (talent) to accomplish better results for their employer.

Therefore, I would argue that Capitalism is a better (fairer) plan.

When a risk-taker is sufficiently motivated by unlimited rewards (even acknowledging that the risk of great loss exists), they’ll expend their time, effort, talent, skills, and creativity to accomplish what has (up to that time) been deemed impossible.

Those vast rewards are realized when the market place determines that Mr. Risk Taker has created something of value and is willing to pay him for it. Of course certain economic conditions will determine exactly how valuable it is, and therefore, how much the general population is willing to pay for it.

How is this fairer for everyone else, you ask?

First, it’s fair that they receive sufficient value for the money spent on Mr. Risk Taker’s goods or services.

Second, it’s especially fair if Mr. Risk Taker is unable to fulfill all the duties required to meet market demand and is forced to hire others to help.

Mr. Risk Taker if forced to hire workers

Under Capitalism, we love and value our “worker bees.” Somebody’s gotta drive the trucks, run and/or maintain the machines, sweep the floors, type the letters, keep the financial books in order, tend the landscaping, plant & harvest the produce, take our blood pressure, tend to our ailments and healing, etc. The employer who not only provides value to the public, but provides sufficient reward to his valuable worker bees, will have some loyal and hard-working employees.

People would rather have jobs than welfare. So those who are rewarded with good jobs have higher self-esteem knowing they’re providing for themselves (and their families). Especially if they have employers who show appreciation through good pay and other intrinsic rewards. In this way, Capitalism is valuing and honoring the population at large: Mr. Working Man.

Lastly, it’s fair because, as Margaret Thatcher said, “The problem with Socialism, is that eventually you run out of other people’s money.” “Social programs” are paid for via taxes. If more and more people are “benefiting” from these social programs, then fewer and fewer are paying for them. Why is it deemed more moralistic to demean large portions of the population by forcing them to be recipients of “social” help than it to give them a job in which they can take pride for being a productive citizen?

In summary, it’s Capitalism that provides:

• the incentive to the risk taker,
• the free market that determines whether that risk taker thrives or fails,
• the free market that determines that the employers who value and honor their employees will not only thrive but reap greater rewards,
• pride of productivity and self-worth for the working man,
• and revenues to pay for the necessary operations of government, and the existential operations of social programs for those with true needs.

Can we agree that unless a person actually happens to like their job, then work is not enjoyable? Yet we engage in it because we believe it benefits us to doing so.

Sometimes even if the only benefit is a pay check.

I know that a certain percentage of the population wouldn’t. They find . . . → Read More: Throwing Gas On the Flames of Class Warfare]]> Psychology 101:

people are lazy. They’re not going to engage in an activity unless it’s:
a) enjoyable
and/or
b) they believe it will benefit them personally.

Can we agree that unless a person actually happens to like their job, then work is not enjoyable? Yet we engage in it because we believe it benefits us to doing so.

Sometimes even if the only benefit is a pay check.

If you could find a way to get paid without having to work for it, would you do it?

I know that a certain percentage of the population wouldn’t. They find satisfaction in the work they do – it’s physically, artistically, or intellectually stimulating for them.

Moocher Class

But there’s another portion of the population that has no desire to achieve, no drive to engage or contribute, and no willingness to learn marketable skills. Oh, they have desires, drives, and skills, but none for which society would be willing to compensate them for using. We’ll call them the moocher class.

“Disabled”

Then there’s a small percentage of the population that truly lacks the ability to care for themselves. Even if they possess desire, drive and skills, there are valid reasons which prevent them from being able to support themselves. Or their bodies cannot handle the demands that would be required to engage in a skill or trade for the amount of time required to earn such a wage. We’ll call them the Able Yet Un-Able class.

Middle Class

The largest portion of the population we’ll call the middle class. These I tend to think of as “worker bees.” They go about their day-to-day routine: do their job, go home, eat, sit in front of the TV or play with the family, and are pretty much content to live life as it comes to them. And there’s nothing wrong with being a worker bee. Indeed society needs worker bees – not everyone can be the queen. There’s a quiet nobility in the middle class. They, for the most part, are the heart of America. They bring up their children to know right from wrong, teaching them a good work ethic, and eventually how to find a mate and raise a family of their own.

Two Percenters

There’s another percentage of the population, commonly called “The Two Percent,” who has Desire and Drive, and are willing to learn whatever Skills are needed to Achieve and Earn more than most. In their efforts to benefit themselves, they end up benefiting society.

How? First, because the marketplace will not compensate the Two Percenters for their efforts unless they provide a product or service that the market place really wants or needs. Therefore, they’ve fulfilled a need that benefits the marketplace (society).

Second, if their product or service is in great demand, they eventually have to hire others to help. Now, they’ve provided jobs.

Now let’s look at how much “compensation” these Two Percenters are going to earn for their products or services. Well, that depends on how much the marketplace is willing to compensate them. If a hypothetical Mr. Two Percent decides to charge too much, nobody will buy. (And if it’s a really good product, someone else will figure out how to provide it for less.) But if he charges too little, then he’s unable to even recoup his costs. Therfore, he’s going to charge an amount which the marketplace tells him is reasonable, as long as he’s able to recoup costs AND make a large enough profit to support himself while he either improves this one product/service or begins work on a new one.

Let’s talk about the costs that Mr. Two Percent has to cover: materials and utilities used in production, wages of any employees and/or contractors, and space needed to manufacture and warehouse the product (if required) are all pretty standard. Some of these are “static” costs and others are “fluid.”

For instance materials and utilities tend to be pretty static. The charges that Mr. Two Percent must pay for these don’t fluctuate very much, unless there’s some kind of supply and demand, or even seasonal effect on price. Space can be a pretty static cost, although rent will rise annually depending on the economy and the area, but cost of ownership of a space will remain constant.

It’s the wages paid that will fluctuate the most. Wage or other compensation will depend on an employee’s or contractor’s position within the company and their particular value to the company (how easy it would be to replace them, their skills, and their knowledge). Although we don’t normally think of Mr. Two Percent actually earning less than anyone else that he would employ, I’ve known many businesses in which the owners made a point of making sure that their staff was paid before they were – even if it meant they DIDN’T get paid at all. That was a choice they made between letting someone go & doing more of the work themselves (when they were already working 80 hours per week), or living on less in order to remain sane.

The Bitter Class

Now! Let’s talk about another portion of our population. We’re going to call them the Bitter Class. You’ll find them among the 98% of the population outside the Two Percenters. How much of that 98% is actually a member of the bitter class is unknown. Definitely 100% of the moocher class belongs in this portion of the population, some of the Able Yet Un-Able are in this class, and there seems to be a growing portion of the middle class within them (thanks to the class warfare that’s being pushed by leaders within the Bitter Class and politicians who would use them). Although we can’t know how many there actually are, here are some was to recognize them:

• They’re envious of anyone who’s a member of the Two Percent class. More than that, they’re jealous.
• They seem to think that the Two Percenters shouldn’t make more than anyone else. And if they do, they should give it all away to “those less fortunate.” And if the Two Percenters aren’t willing to do that, they want the government to play Robin Hood by forcibly taking what the Two Percenters have worked for and EARNED, and redistribute it to those who didn’t work for it nor earn it.
• They seem to think that businesses shouldn’t make profits. I guess they expect the owners and stockholders to work and invest their time, energy, and capital without thought to compensation. Yet they don’t seem to think it wrong for entertainers and artists to be compensated for their work or uniquely created material.
• Some go so far as to think that companies shouldn’t charge for their products or services. I suppose they expect all the company employees to work for free, too. What would they think if someone were to suggest the same to their employer?

Remember our first point of agreement: people are lazy and will not engage in activity they find either unenjoyable or does not benefit them in some way? You see, the Two Percenters are the same. They either enjoy what they do, or expect a benefit (compensation) for engaging in that activity, or both.

And the Bitter Class will always enjoy and/or see the benefit in buying into the socialist agenda of class warfare and the concept of “from everyone according to their means, to everyone according to their needs.” They’ll always blame everyone and everything else but themselves for their standard of living. They’ll always point fingers, shake fists, and shout to anyone who’ll listen that somehow they’re a part of “those in need” and are not only owed some of those means, but that it’s those with the means that have held them back and kept them down, and that’s why their standard of living isn’t to the level that they’d like. To them, there’s always a conspiracy of “the rich” to keep others “poor.”

Some members of the Bitter Class will NEVER leave it. But there are some who can be educated enough to realize that:

• There really is no benefit to “the rich” to keep others poor.
• There really is not a limited amount of wealth in the world – it can be created.
• They can improve their standard of living simply by learning to make themselves more valuable to the marketplace.

I can tell you from personal experience that the Bitter Class mindset will never make you valuable to the marketplace. You’re the kind of person that the marketplace “smiles when you walk out of the room” instead of when you enter it.

Grow Up!

So stop ranting about the rich not paying their fair share. (And when you hear someone else spout such dribble, remember that they’re just being a crab in your bucket – yeah, go look that one up.) The “evil rich” have paid more than their fair share through blood, sweat, and tears in order to reach the status that they’ve achieved. And they still contribute to society in more ways than you can ever comprehend with your limited understanding and your limited viewpoint – that refuses to even look in order to begin to understand. You don’t know how much they make nor how much of it they give away. And they’ll never give it to you because they choose to give where they see fruit – and you ain’t producing it. As a matter of fact, you’re most likely the poison that’s killing the fruit of others.

If you want to increase your value to the marketplace, start first by closing your mouth and start looking at the fact that everyone (including “the rich”) has the same problems and issues as you, yet some are somehow able to overcome them. Then figure out how they overcame them. If you want to do the same, then take the same steps they did.

Everyone is human and shares the same frailties. Why don’t you stop asking, “What can I get for free?” And start asking, “What can I do in order to EARN what I really want?”

At what point is one considered “fortunate” – financially speaking? Well, Obama has, in the past used the $250 thousand annual salary as this magical beginning point.

You’ve probably heard numbers thrown around lately giving certain statistics regarding which “fortunate” . . . → Read More: What happens when one is considered “fortunate”?]]> By now everyone’s familiar with the gist of Obama’s plan to address this nations deficit and dire financial circumstances: by raising the taxes on those who are “fortunate.” For the purposes of this post, though, I’m going to set aside the fact that our problem isn’t a revenue issue but a spending issue, and focus solely on the word “fortunate.”

At what point is one considered “fortunate” – financially speaking? Well, Obama has, in the past used the $250 thousand annual salary as this magical beginning point.

You’ve probably heard numbers thrown around lately giving certain statistics regarding which “fortunate” members of our society pay how much of the total federal revenues received from income taxes. There’s a very good report by The Tax Foundation which uses actual IRS data. It’s pretty easy reading and you can see the numbers for yourself. Here are some points to take note of:

• In 2008, “the top-earning 5 percent of taxpayers… earned 34.7 percent of the nation’s adjusted gross income, but paid approximately 58.7 percent of federal individual income taxes.”
• “Overall, these data on high-income tax returns appear to confirm that the recent recession…”, like most recessions, “occurred for the same reason, a sharp decline in income at the high end.”
• The top 25% of income earners had a sum total AGI (Adjusted Gross Income) of approx $5,678,179 Million (yes, that’s over 5 Trillion) and were taxed at an average of 15.68%, thus paying $890,614 MILLION in taxes. (That would be over $890 Billion dollars. )
• “… taxpayers with an AGI of $159,619 or more in 2008 constituted the nation’s top 5 percent of income earners. To break into the top 1 percent, a tax return had to have an AGI of $380,354 or more”
• The top 1% of income earners paid 23.27% of their AGI in taxes. (That would be $88,508.38 out of the $380k quoted above.) Top 5% paid 20.7% of AGI in taxes. (That would be $33,041.13 out of the $159,619 quoted above.)  The top 5-10% paid 12.44%. Top 10-25% paid 9.29%.

Could you imagine having a small business and working your butt off at least 18 hours per day, “24/7/365″ as they say, and having an AGI of  $159 thousand dollars and having to turn around & give $33 thousand to Uncle Sam? OR doing very well, having an AGI of $380 thousand and having to give away $88 thousand of it?!?!?

Did you know that if you win the lottery or report your gambling earnings, the Federal Government will take 40% of those winnings as taxes on “unearned income”? Based on the stats above, the folks who work their butts off to earn that money may as well have been gambling or playing the lottery instead of working hard to make a buck. AND hire employees for good paying jobs. Which would you rather do?

Let’s look at it like this. Most people believe they could live comfortably if they were earning $50,000 annually during their retirement. In order to be earning that much money in interest and dividends – remember you’re not working so you don’t have an “income” – you’d have to have ONE MILLION DOLLARS invested and earning 5% interest (which you just about can’t find any more). Want to be earning $75,000 annually so you could travel and live a life of relative luxury? Then you better have $1.5 Million in those investments earning 5%.

And guess what? You’re still gonna have to pay taxes on that “income” too.

Does any of this sound very “fortunate” to you? And Obama wants to make it worse!

In the interest of not wasting work/time, I wanted to post some of that discussion here.

And I understand the uproar. These companies were in trouble, supposedly about to crash, and the government (we tax payers and our children and grandchildren) bailed them out. And now MILLIONS are going to the very corporate executives who watched it all happen & did nothing to stop it?!?!?!?

So now the government wants . . . → Read More: Bail-Outs & Bonus Pay]]> There has been a butt-load of chatter going on the past few days about the big bonuses being paid to top executives of the companies that received bail out funds from the Federal Government. Namely AIG, the insurance & finance giant, but other companies as well.

And I understand the uproar. These companies were in trouble, supposedly about to crash, and the government (we tax payers and our children and grandchildren) bailed them out. And now MILLIONS are going to the very corporate executives who watched it all happen & did nothing to stop it?!?!?!?

So now the government wants to do something about it. One idea is to get the bail-out funds back. Ok, that’s fair. If the company is doing so well that they can afford to blow money like this, then they don’t need it. If the government gets the funds back, then that’s less debt on the backs of tax payers of this and the next two generations.

But what our elected & esteemed members of Congress are really focusing on is capping the incomes of executives with those companies who received bailout funds at $500,000.

BAD idea!!! Let me count the ways.

It ain’t nobody’s business!

That’s a matter between each Corporate Executive, their bosses, and the owners and/or shareholders of the company.

First of all, these executives aren’t regular employees like most people are. They don’t go in to the HR department begging for a job, fill out an employment application hoping there’s a position available that meets their skill set, and wait by the phone for a call. Then go into an interview and lie about how great they are and why they should be hired, when their only motivation is to “get a job, any job, as long as there’s some money coming in to pay the rent and utlities.”

These are persons with highly specialized skills, which they spell out on a resume. Most likely, they didn’t go begging for a job. The employer chased them! In exchange for the company’s use of those specialized skills, there is a contract between this executive and the company, which specifies the means by which they’ll be paid. Included in that contract is a salary AND certain bonuses that are payable annually (at least).

Since contractual law is binding, under the terms of the contract, that company is obligated to pay those bonuses. Are we going to start allowing companies to break contracts because WE don’t agree with it? If we’re going to start doing that, then contracts will loose their power to bind by law.

The Constitution is our Federal Government’s contract with its Citizens. It specifically mentions contracts, that’s how important they are. Thus, IF the government forces the companies to break those contracts, either the US Constitution is invalidated, or those we’ve elected who support this measure are immediately subject to impeachment because they’ve violated their oath to uphold & protect it.

That said, here’s where those companies are stupid, in my opinion…

Bonuses should ALWAYS be performance based.

Those bonuses should have been based on a percentage of company profits. If I were the owner of that company (or a member of the board of directors of a public company), there’s no way I would bind myself via contract to pay someone a bonus that might be undeserved. If the company is failing, those who are running it are failing. After all, if the company isn’t making any profit, where is that bonus money coming from? And if the company isn’t making profits, and the bonuses are paid, then those funds decrease the revenues available to pay the owner/shareholders. Or, as in this case, the company goes in debt to pay those contractually bound bonuses. Now that’s stupid!

Before going into my next point, let’s talk a little basic economics. You might recall an earlier post I wrote regarding economics & the Presidential Election. Remember one of the basic premesis of a free-market system is supply & demand – which is highly influenced by…

Reward & Punishment.

The free-market will determine which product, services or skills are in demand, as well as how much they are worth. They are worth what the market is willing to pay. I may be a decent singer, but the market is definitely not willing to pay to hear me! So if certain people have certain skills that are in demand to fulfill certain needs within a company, it is that company and the free market system that will determine how much those skills are worth.

And the government is the worse entity to put a cap on ANYTHING. Remember those $200 hammers & $500 toilet seats? The government is also the ones who set the $10,000 life insurance coverage for disabled vets. That was set back in WWII, and is still in effect today! Granted that was a lot of money back then – could buy you a really nice house. But today, that’s barely a down payment on a small home! Are we going to leave this up to the Feds?!?!?!?

On the other hand, if the free-market is working as it normally does, and one of the corporate executives from AIG, or other bailed out or failed companies goes looking for his next job, do you think they’re gonna be able to get such a cushy salary and multi-million dollar bonuses? Absolutely not! They’ve just proved their level of incompetence!

Life isn’t always fair.

So, although there are obviously many people in our country today who believe it’s unfair that corporate executives get paid so much, maybe they should really take a deep look in the mirror. There are always going to be some people who make more than the average person. And there’s always going to be a large pool from which to hire a McDonald’s cashier. What are you doing to improve your worth in the marketplace such that you are worthy for higher pay?

Ok, that question has the potential to take us on a real tangent! Enough books have been written on the subject without my adding to the subject.

The point is, sometimes life is unfair. The climate runs in cycles. The economy runs in cycles. And the problem is only as bad as we perceive it to be. The government needs to get its nose out of the free market. Let it correct itself. And it needs to stop trying to hinder free enterprise! Let companies make their own decisions and pay the consequences of them. Good or bad.

Last week I got irritated that one of Obama’s first acts as President was to implement a ban on off-shore oil drilling. How can a person stand up in front of the entire world and give an inaugural address in which he states that one of his goals is to decrease our dependence on the foreign energy sources of America’s enemies, then turn around and essentially shoot us in the foot by limiting our ability to . . . → Read More: Obamanomics: Part 2]]> Ok, I don’t know how many “parts” there are going to be on this topic, but I suspect that this won’t be the last.

Last week I got irritated that one of Obama’s first acts as President was to implement a ban on off-shore oil drilling. How can a person stand up in front of the entire world and give an inaugural address in which he states that one of his goals is to decrease our dependence on the foreign energy sources of America’s enemies, then turn around and essentially shoot us in the foot by limiting our ability to access our own energy sources?!?!?!? This INCREASES that dependence AND cuts jobs!

This morning, he gave a 10 minute speech on changing our energy sources and decreasing our energy consumption. Those are great goals, but his actions say differently, so far.

But what’s REALLY bothering me is his stupidity when it comes to the economy!

Just this morning, Obama himself said that there’s a need for “urgent action” on the current “economic crisis.” He’s right about that. What this economy needs RIGHT NOW is a defibrillator! Yet none of his proposed plans do anything to stimulate the economy RIGHT NOW!

He’s proposing a $7 TRILLION dollar plan that does absolutely nothing to create new jobs that would replace any of those lost. (By the way, this is DEFICIT spending, which is what Democrats and fiscally conservative Republicans were griping about under the Bush Presidency.)

Producing better schools and making college more accessible is a worthy goal. But education spending is a focus on the future – NOT the here and now.

Creating cleaner, cheaper energy sources is a worthy goal. But again, that is a focus on the future, not on the here and now when people are loosing their jobs and their homes.

Obama’s “tax cuts” are nothing more than thinly disguised welfare.

Obama’s insistence that government is the answer to our problems is just stinkin’ thinkin’! It’s government that got us in the mess in the first place! How about getting out of the way and letting the Free Markets work the way they’re supposed to to get us out of this mess?

How about enacting the FairTax?

• The FairTax will allow poor & middle class workers to take home their entire paycheck! Now that is a real “here and now” tax cut that will provide a stimulus where it’s needed most!
• The FairTax, through the prebate, will ensure no American pays federal taxes on spending up to the poverty level.
• The FairTax will remove the burden of tax forms, laws, compliance, and payments from the shoulders of the citizens.
• The FairTax will provide the means and incentive for business to create more jobs. (By the way, Obama’s plan to cut Capital Gains taxes for corporations is a farce – corporations don’t pay Capital Gains taxes!) These are real, permanent jobs that businesses create to replace those that have been lost. Or even reopen the positions that have previously been cut!!
• The FairTax will provide a big shot in the arm for the economy, because it will boost consumer confidence, and all that capital sitting in off shore accounts to avoid the punitive US tax system will come back!
• All those jobs that keep moving to other countries will come back to the US, because the current tax code which punishes success will be gone!
• Lastly, the FairTax will INCREASE the revenues collected by government (because the GDP is always bigger than incomes) AND save the government bookoos of money (yes, I know, I’m using such technical economic verbiage!) because it no longer has to try to catch the cheaters among the (estimated) 115 US households!

Other countries don’t want the US to implement the Fair Tax. Because WHEN we do, they’ll loose all those jobs and businesses and capital that had previously left the US for those foreign shores. Not only that, but more businesses will move to the US because it will offer a better tax environment – even for non-US companies!

Visit my earlier post about the FairTax.

More importantly, please visit the FAQ page of the FairTax.org website to get more details about how the FairTax would be a better stimulul plan, and to see what you can do to help!