On Defending Billionaires

In the recent UK general election and in previous and present US political discourse, there has been a propensity to defend billionaires by those who aren’t billionaires. In fact, those who defend them are far, far closer to poverty and bankruptcy than to being a billionaire. By a considerable margin.

The defence of billionaires seems to come from some sort of trickle-down economics ideal, an economic model (that I like referred to in its old amusing nomenclature of horse and sparrow economics) that has been shown not to work. The idea that we should let rich people, supposedly all wealth-makers, have tax cuts and an easy run because they generate jobs, economic benefit and whatnot for the wider society. If we tax them appropriately, so it is claimed, they will run off to a foreign country and set up their businesses there.

Except this doesn’t really happen. Just look at the rather solid case of Kansas, where (under the leadership and advice of Governor Sam Brownback and supply-side economist Arthur Laffer), the tax cut experiment wholly failed. Trump’s tax cuts in 2017 have since been shown to have failed in what they set out to do (improve worker productivity, raise wages, and supercharge economic growth – goodness, I could write a whole piece on how it has been an expensive failure on all fronts). There is a strong case for higher taxes in the US. After all: “Bill Gates: Tax rates on the wealthy were nearly double when we started Microsoft and ‘it didn’t hurt’ us“. Indeed, Gates has a net worth of $113 billion. That’s a lot of a lot. He recently says he has a disproportionate amount of wealth (reward):

“The wealth gap is growing. The distance between top and bottom incomes in the United States is much greater than it was 50 years ago,” Gates writes. “A few people end up with a great deal — I’ve been disproportionately rewarded for the work I’ve done — while many others who work just as hard struggle to get by.”

He proposes a wide range of ways to make higher taxes on the rich a reality, many of them ideas he’s suggested before: raising the capital gains tax, raising the estate tax, removing the cap on income subject to Medicare taxes, closing the carried-interest loophole that mostly lets savvy investors pay less in taxes, and taxing large fortunes (he prefers to tax them once they’ve been held for a long time, such as 10 years).

None of these are unique ideas, and many of them have been proposed by tax policy experts (which, Gates admits, he isn’t). They’re also strikingly similar to proposals that have been raised in the Democratic presidential primary (though Gates writes that he “will not take a position on the proposals that are being debated during this campaign season”).

Deservedly or not, Gates has a lot of influence in our national conversation about the ultrarich and what they do, so it’s significant to have him among the prominent billionaires pushing for higher taxes and rebutting many of the arguments that such taxes would be unfair to the rich or discourage innovation. Taxes, Gates points out, were much higher when he founded Microsoft, which didn’t get in the way of his motivation to start the company.

“A dynastic system where you can pass vast wealth along to your children is not good for anyone; the next generation doesn’t end up with the same incentive to work hard and contribute to the economy,” Gates writes, defending higher estate taxes. And the difference between capital gains taxes and income taxes “favor wealth over work,” with no good justification.

He can’t seem to even philanthropically spend it quickly enough… I have written before about maintaining privilege through inheritance.

Nick Hanauer, one of these rich types, agrees with me:

When I was asked to join 17 other zillionaires in signing on to a letter supporting a modest wealth tax, I didn’t hesitate for a nanosecond — not just because it is the right thing to do for the American people, but because it’s the right thing to do for the American economy. In fact, as a venture capitalist and serial entrepreneur who has made a personal fortune founding or funding more than 30 companies, I have come to the conclusion that a wealth tax would actually increase investment, boost productivity, grow the economy, and create more and better jobs.

Now, I know what you’re thinking: That’s crazy talk! For decades, rich guys like me have been selling you tax cuts on the merits of pure economic stimulus. The rich are “job creators,” we’ve told you. The more money we have to invest in creating jobs, the better the economy is for everybody.

Bullshit.

To be clear: There is simply no empirical evidence to support the claim that raising top tax rates slows economic growth. When President Bill Clinton hiked taxes, the economy boomed. When President George W. Bush slashed taxes, the economy ultimately collapsed. It wasn’t until after most of the Bush tax cuts expired during the Obama administration that the post-Great Recession recovery started to pick up steam — an ongoing recovery that, as uneven as it has been, has grown into the longest economic expansion in U.S. history.

And then, of course, there’s Kansas.

So, what’s the point of me writing today? Well, I want to make a claim that people don’t understand big numbers. They just don’t quite get what a billion actually is.

Let’s hit you with a favourite meme to help show this:

If you worked every single day, making $5000/day, from the time Columbus sailed to America, to the time you are reading this tweet, you would still not be a billionaire, and you would still have less money than Jeff Bezos makes in a week.

It’s one that’s done the rounds on Facebook and elsewhere, and it is verified. That, above, is true. Just let it sink in, the sheer scale of it.

And then think of the scale of Jeff Bezos’ wealth (and remind yourself that the richest woman in the world is now his ex-wife, simply on account of the divorce settlement, but that this still leaves him with $115 billion).  See the latest billionaire figures here.

The world’s billionaires have more wealth than 4.6 billion people. That’s another staggering fact. Here’s a really mind-blowing piece on the amount of money these guys have and what they could do with it, and generally what a billion is, and how we just can’t visualise it.

Jeff Bezos alone, according to UN figures, could end world hunger (at $30 billion a year, though some say it is a lot higher). IT’s like someone on $52k a year spending $3 a week to end world hunger. Indeed, “Billionaires Made So Much Money Last Year They Could End Extreme Poverty Seven Times” – but that was 2 years ago, and the article states that a new billionaire emerges every 2 days, and there were over 2000 billionaires then. You can argue that a simple, solitary billion is too much money for any one person to have. I read somewhere that if you took all the billions off every billionaire, but still left them each with a billion, you could solve world hunger for 282 years. Or something. I’d like to think, in such a position, I would be trying bloody hard to solve the environmental calamity in which we find ourselves embroiled.

You get the picture.

We live in a world where the inequality gap is growing, where the super-rich class is growing, but where many in the poorer classes defend these super-rich because, you know, the American dream – they could one day be a billionaire.

Except they won’t. Except, they have a much, much, much, much greater chance of being penniless.

Let me remind you of John Rawls’ Veil of Ignorance:

Spencer J. Maxcy outlines the concept as follows:

Imagine that you have set for yourself the task of developing a totally new social contract for today’s society. How could you do so fairly? Although you could never actually eliminate all of your personal biases and prejudices, you would need to take steps at least to minimize them. Rawls suggests that you imagine yourself in an original position behind a veil of ignorance. Behind this veil, you know nothing of yourself and your natural abilities, or your position in society. You know nothing of your sex, race, nationality, or individual tastes. Behind such a veil of ignorance all individuals are simply specified as rational, free, and morally equal beings. You do know that in the “real world”, however, there will be a wide variety in the natural distribution of natural assets and abilities, and that there will be differences of sex, race, and culture that will distinguish groups of people from each other.^[2]

It has been argued that such a concept can have grand effects if it were to be practiced both in the present and in the past. Referring again to the example of slavery, if the slave-owners were forced through the veil of ignorance to imagine that they themselves may be slaves, then suddenly slavery may no longer seem justifiable. Perhaps the entire practice would have been abolished without the need for a war to settle things. A grander example would be if each individual in society were to base their practices off the fact that they could be the least advantaged member of society. In this scenario, freedom and equality could possibly coexist in a way that has been the ideal of many philosophers.^[3] For example, in the imaginary society, one might or might not be intelligent, rich, or born into a preferred class. Since one may occupy any position in the society once the veil is lifted, the device forces the parties to consider society from the perspective of all members, including the worst-off and best-off members.

If you didn’t know where you would be born, into which class, and with what level privilege, then what rules and taxation would you set? If these non-billionaires had a really proper understanding of maths and probability, I wonder whether they would change their tune?

I’m not some billionaire-basher, and I wouldn’t want to quash aspiration, but if Bill Gates is admitting something is wrong, that something is very disproportionate in the system, then something is probably wrong and needs changing.

TL;DR? A billion is a feck of a lot, and people don’t understand it, or its context, erroneously thinking they might well be a member of its class one day, and that by highering taxes on them, we will lose them to elsewhere and send our localised economy into a freefall spiral, and by cutting taxes for these rich, we are doing the country a great service.

The American Dream, underwriting the GOP, has a lot to answer for.

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