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KRUGMAN: Who's very important in America?

&‘&‘Is there a VIP entrance? We are VIP." That remark, by a donor waiting to get in to one of Mitt Romney's recent fundraisers in the Hamptons, pretty much sums up the attitude of America's wealthy elite. Romney's base — never mind the top 1 percent, we're talking about the top 0.01 percent or higher — is composed of very self-important people.

Specifically, these are people who believe that they are, as another Romney donor put it, "the engine of the economy"; they should be cherished, and the taxes they pay, which are already at an 80-year low, should be cut even further. Unfortunately, said yet another donor, the "common person" — for example, the "nails ladies" — just doesn't get it.

OK, it's easy to mock these people, but the joke's really on us. For the "we are VIP" crowd has fully captured the modern Republican Party, to such an extent that leading Republicans consider Romney's apparent use of multimillion-dollar offshore accounts to dodge federal taxes not just acceptable but praiseworthy: "It's really American to avoid paying taxes, legally," declared Sen. Lindsey Graham, R-S.C. And there is, of course, a good chance that Republicans will control both Congress and the White House next year.

If that happens, we'll see a sharp turn toward economic policies based on the proposition that we need to be especially solicitous toward the superrich — I'm sorry, I mean the "job creators." So it's important to understand why that's wrong.

The first thing you need to know is that America wasn't always like this. When John F. Kennedy was elected president, the top 0.01 percent was only about a quarter as rich compared with the typical family as it is now — and members of that class paid much higher taxes than they do today. Yet somehow we managed to have a dynamic, innovative economy that was the envy of the world. The super-rich may imagine that their wealth makes the world go round, but history says otherwise.

To this historical observation we should add another note: Quite a few of today's super-rich, Romney included, made their money in the financial sector rather than building businesses in the old-fashioned sense. Indeed, the soaring share of the wealthy in national income went hand in hand with the explosive growth of Wall Street.

Not long ago, we were told that all this wheeling and dealing was good for everyone, that it was making the economy more efficient and more stable.

Instead, it turned out that modern finance was laying the foundation for a severe economic crisis whose fallout continues to afflict millions of Americans, and that taxpayers had to bail out many of those supposedly brilliant bankers to prevent an even worse crisis. So at least some members of the top 0.01 percent are best viewed as job destroyers rather than job creators.

Did I mention that those bailed-out bankers are now overwhelmingly backing Romney, who promises to reverse the mild financial reforms introduced after the crisis? To be sure, many and probably most of the rich do, in fact, contribute positively to the economy. However, they also receive large monetary rewards. Yet somehow $20 million-plus in annual income isn't enough. They want to be revered, too, and given special treatment in the form of low taxes. And that is more than they deserve. After all, the "common person" also makes a positive contribution to the economy. Why single out the rich for extra praise and perks?

What about the argument that we must keep taxes on the rich low lest we remove their incentive to create wealth? The answer is that we have a lot of historical evidence, on the effects of tax increases on the rich, and none of it supports the view that the kinds of tax-rate changes for the rich currently on the table — President Barack Obama's proposal for a modest rise, Romney's call for further cuts — would have any major effect on incentives.


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